The Good and the Bad about “First Party” Special Needs Trusts

We work with a lot of clients with disabilities who are receiving public benefits like SSI, Medicaid, Family Care, and public housing. They have been referred to our office because they are about to receive some money. For example, perhaps a relative died and they were the beneficiary of a life insurance policy. Or possibly, they were in an accident and are getting funds from a personal injury settlement. In cases like these, while getting money is usually a very good thing, it can have a negative effect on the person’s eligibility for benefits. It is important to do what we can to to minimize any negative effects. Understanding the issues and rules takes special experience and so often, the original attorney handling your matter will refer you to a “special needs planning attorney” like Carol Wessels and Jessica Liebau in our office.

One of the things we think about is called a “special needs trust.” It is a special kind of trust that is set up with the person’s money. If it is done correctly, the money is not counted against the person as far as their eligibility for benefits. But there are some catches. Here is a quick summary of some of the main things to know:

  1. Not all benefits are affected when you receive money, so it is important to know the options in your specific case.
  2. A trust may not be the only option you have , so it is also important to talk with someone who can explain your options so you can make the choice that is best for you.
  3. If you are acting on behalf of someone who cannot act for him or herself, you have to have the legal authority to do so.
  4. A trust that is set up with money that belongs to the person on benefits is called a “first party” trust. A trust that is set up with money that does not belong to the person is not a first party trust. This article ONLY talks about first party trusts.
  5. The two most common “first party” trusts are a privately drafted trust, where you can choose who will be the trustee, or a “pooled trust” which is run by a non-profit organization. With a “pooled trust” you open an account with the trust and the funds of many people are “pooled” together for investment purposes. They do keep track of your own account separately, however.
  6. THE GOOD: With either type of “first party” special needs trusts, the best part is that the funds in the trust can be used for your needs, and that if done correctly, you do not lose your public benefits.
  7. THE GOOD: Pooled trust accounts are very easy to set up, and so are privately drafted trusts. You just need to work with a lawyer who handles special needs planning. Even though the trusts themselves are complicated, your special needs planning lawyer will make your part easy.
  8. The BAD: The first thing to know is that the trust is irrevocable. This means that once you put your money in it, you cannot change your mind and get it back out.
  9. The BAD: When the funds are in the trust, you are not the final decision maker on how the funds are spent. A trustee is in charge of the trust, and it can’t be you. So you will need to work with the trustee to come up with a plan on how those funds will be used.
  10. The BAD: In most cases, you cannot simply get cash out of the trust account. It is not like a bank account. You don’t just go and withdraw $20. In most cases, the funds cannot be given to you directly, rather they are sent to the places you need, such as paying your cell phone bill or your credit card or your gym membership. When the trust pays things for you, this is called a “distribution.”
  11. The BAD: It usually takes more time to get a distribution to pay something than if you simply were writing a check out of your own account. You really need to plan ahead and be organized.
  12. The BAD: there are some cases where the way the funds can be used is restricted. For example, if you are on SSI, chances are the funds in the trust cannot be used to pay your rent and certain other “shelter” expenses, since that would cause your SSI to be reduced. It is important to go through the things you want the trust to pay, when making your decisions. about whether the trust works for you.
  13. The BAD: When you die, if there are funds left in the trust account, they do not go straight to the people you choose as beneficiaries. First, if you received any Medicaid during your life, the funds go to pay back Medicaid. (Or with a pooled trust they might go to a pool to benefit other people with disabilities.) ONLY if there is enough money in your trust to pay Medicaid AND have money left over, will your beneficiaries get anything.
  14. The Bad: These cost money to administer. First, your lawyer will charge you to set the trust up. Second, there will be tax requirements that will require the use of a professional accountant, and third, a professional trustee will charge a fee. A pooled trust will most likely also charge a fee, since the funds are professionally managed, although some of them charge reduced fees based on the amount in the trust.

Normally, even though the list of the BAD is a lot longer than the list of the GOOD, the two GOOD things are REALLY GOOD. And as long as you learn to work within the limits of the trust rules, you can get a lot of benefit from having a trust. So all in all, the good outweighs the bad. But you need to think these things through and talk about them with your special needs planning lawyer. Let us know if you would like to talk!

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“I Signed Up for WHAT?!” (A Note on Admission Contracts.)

Recently a client came to our office asking for assistance with qualifying dad for Medicaid. Dad is already in a long-term care facility, and he’s running out of money. This conversation generally went as follows:

“When can dad apply for Medicaid?”

“What does his admission agreement say?”

“His what?”

“The contract that was signed when he moved into his facility.”

“Oh yeah. I remember signing that.”

“You signed it, rather than dad?”

“Yes. I’m dad’s POA, and dad has dementia.”

“Did you read it before you signed it?”

“Kind of, not really. The facility told me I had to sign it to get dad in, so I did.”

“Can you provide me with a copy of it?”

“Sure, here it is.”

“Ok, this says you signed as a financially responsible party.”

“Yes, I’m his POA.”

“Yes, but this says you are personally guaranteeing the contract.”

“What does that mean?”

“It means that if dad runs out of money, the facility can come after your personal assets to pay for dad’s care.”

“WHAT?!”

“Unfortunately, yes.”

“Is that even legal?”

Our office has this conversation with clients, often. The answer to “is it legal?” may come down to how the facility is licensed.

If dad is in a skilled nursing facility (a “real” nursing home), those facilities are prohibited by federal law from requiring a personal guarantee from someone other than the resident. In particular, 42 CFR § 483.15(a)(3) says:

The facility must not request or require a third-party guarantee of payment to the facility as a condition of admission or expedited admission or continued stay in the facility. However, the facility may request a require a resident representative who has legal access to a resident’s income or resources available to pay for facility care to sign a contract, without incurring financial liability, to provide facility payment form the resident’s income or resources.     

In simple terms, a skilled nursing facility cannot define a “responsible party” as someone who will use their own money to guarantee payment. The facility can have someone agree to help make sure dad’s assets are used to pay dad’s nursing home bill each month and serve as a contact person, just like a power of attorney agent might do.

Facilities will sometimes say, “well, we didn’t require it, but we can ask for it.” The law says the facility should not even be requesting it. If dad is in a skilled nursing facility, a third-party guarantor provision is illegal. That’s the good news.

If dad is in a “lesser” level of care, like assisted living, the answer is not so good. In Wisconsin, facilities might be licensed as a group home, or a community based residential facility (“CBRF”), or a residential care apartment complex (“RCAC”), for example. Regardless of the specific type of license, if dad is in one of these lower levels of care, and not a skilled-nursing facility, then the prohibition in 42 CFR § 483.15(a)(3) does not apply. This means if dad runs out of money and rings up a large bill before he passes away or is asked to leave, the guarantor can be held legally responsible for paying that debt from their own assets.

“Are you saying that because I signed the contract for dad’s assisted living, and I signed a third-party guarantor agreement, that I’m on the hook?”

“Quite possibly, yes.”

“Well, what now? Should I have dad move?”

“Does dad want to move?”

“No, he likes it there and I think the care is pretty good. And we’ve already privately paid for over a year. But I don’t want to lose my house when he runs out of money. Ugh, this is terrible.”

If the contract is not already in place, the obvious advice is to read it before it is signed and seek a legal opinion if at all unsure of what it says. All admissions agreements are not the same. They vary from facility to facility and contain all sorts of things that may or may not be problematic or enforceable. Reviewing it carefully before it is signed can avoid major issues later.

After the contract is in place, the options are different. Now, the important step is to make sure the facility has no reason to go after the third-party guarantor. The facility does this when they aren’t getting paid. Therefore, the crucial thing for the client to do is work with an experienced elder law attorney to help them understand (1) when dad is going to run out of money, (2) whether the facility accepts Medicaid and what that looks like (restrictions, change of room, etc.), and (3) how to make sure dad achieves Medicaid eligibility as soon as he’s out of money so that the third-party guarantor doesn’t end up stuck with an unpaid assisted living bill. Sometimes this is straightforward; sometimes it’s a jigsaw puzzle.   

Initial missteps do not automatically spell disaster. The name of the game is being as proactive as possible, no matter what stage of planning the client is at. And of course, always, always read the agreement before it is signed.

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Getting your ducks in a row – Part one.

Awhile ago I wrote about the most important estate planning documents a person needs. You can read that article here. After it was published, it motivated some of our readers to make an appointment and get things done. Yet, when we are helping clients with estate planning, the truth is that some of them are simply not ready to deal with it yet. For those people, contemplating heady topics like death and disability needs to happen in very small increments. That is fine, just don’t die or become disabled until you have made your way through it.

For those of you in that phase, there are still important things you can do to feel like you are “taking charge” of your estate planning life. Here are five things that will help you start to get your ducks in a row:

  1. Make a folder. I call this folder “WHEN I DIE” because it is not a matter of if, it is a matter of when. You could get a distinctive folder, or put fancy stickers on it, or every year on Dec. 31 you could write on the front “Not dead yet!” (A favorite movie of mine, Monty Python and the Holy Grail, has a very “gallows humor” type scene about this issue.) In this folder, start putting a copy of the account statements for the accounts and investments that you own. You can add in credit card statements, loan statements, income statements and other things relevant to what someone would need to take care of. You don’t need to do this every month, but make sure that you have a copy of a statement for every asset. If you own property, put a copy of the tax statement for the property in the folder. That way, when you die, whoever is handling your affairs will have a better idea of what you own and what you owe. You can also include other important things in the folder, like songs you might want played at your funeral, or poems, or a list of people who would want to know when you die. Once you do get your estate planning done, you can put this folder in with those documents. But for now, making it is a great first step.
  2. Buy a safe. A safe is a good thing for everyone to have, since you can put important information in it, and it is likely to be fireproof and waterproof. Costco has a good selection of them and you do not need to be a member to buy many of their items online. Here is a link to a good one that I own. I like it because you can have a combination and a key. (Fire Resistant Safe from Costco). Once you have your safe, you can put important things in it, such as your “When I die” folder, and give the combination to someone you trust. At this point, you could also start making a list of important passwords to add to the “When I die” folder, since it will be in the safe. And, when you do decide to finish your estate planning, you will have a good place to put those documents. Tip: Save up those little “moisture absorbing” packets that come in shoe boxes and many other things, and throw them in the safe. That way it won’t smell so musty. The Costco version comes with one packet but more is better.
  3. Make a list: you should have a list of the names, addresses, email and phone numbers of the people who are important to you, such as your children, friends, siblings, parents. These are people who at some point you may choose from to be your agents on your estate planning documents. When you get this done, put a copy in your “When I die” folder. You may want to capitalize on your momentum, and make a list of your assets. This is going even a step beyond the “When I die” folder, since it is actually accumulating the information on a list you can share with your estate planning attorney and certain others when you are ready. Here is a link to a form we give our clients to fill out. Information form for Estate Planning. You can put a copy of this in your “When I die” folder too.
  4. Clean up: One of the best things you can do is to start getting rid of your junk. That way, if something unexpected happens to you, there is less of your stuff for someone to weed through. There are many resources to help you do this. My favorite is “The Gentle Art of Swedish Death Cleaning” For a recent birthday, I asked my son to death clean with me. We got rid of a LOT of stuff.
  5. Talk. When it comes to health care decisions, which are another important part of estate planning, it is critical that the trusted people you will choose as your agents (when that momentous day comes that you do actually get your powers of attorney done) know how you feel about certain health care decisions that could come up. A website to help you get this started is called “The Conversation Project.” Here is a link: https://theconversationproject.org/

Now that you are on a roll, make an appointment with your lawyer. Get it on the books. It doesn’t mean you need to get everything done, but you owe it to yourself to talk about this, and consider your estate planning options. Consider it an “informational” session. In my firm, we are not high pressure when it comes to something like this. We know that estate planning – at its best – is not a cookie cutter business where we funnel you through a seminar into a high-pressure meeting. We are happy to have you come in to talk, and take time to think about it. Just don’t take too much time, since we have unfortunately had people die before their estate planning was done, and the documents are not effective until they are final. You also might want to get a pricing idea, since good estate planning will be a financial investment. The initial appointment can help you understand the costs of different options, and the costs of doing nothing. Hint: the costs of doing nothing are always higher. Guardianship and probate proceedings are court cases where lawyers and court fees are involved.

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ROUND TWO: When “protection” goes wrong…financial exploitation bills introduced in Wisconsin go too far and need to be changed, not passed into law.

The bills I wrote about last September have reared their ugly head again. Thankfully, the bills went nowhere last year. But they are on the table again. This is a refresh of my original article with updated bill numbers. 

Sometimes, protection goes too far. That is what is happening in Wisconsin right now. Two bills were introduced in the Wisconsin Legislature yesterday. These bills purport to protect seniors from financial abuse. They are SB 19 (AB 46) and SB 20 (AB 45). However, the way they are currently written, in the guise of protecting seniors from financial abuse, these bills throw a competent person’s right to control their own finances under the bus.

SB 20/AB 45 (text here) relates to securities industries professionals. These are your financial advisors and investment brokers. Your Edward Jones, Thrivent, Morgan Stanley officers to name a few, as well as the smaller private brokers that you have trusted with your investments.  These are the people that hold your really big funds.

SB 19 / AB 46 (text here) related to financial institutions. This is your bank, big and small, local or national, your mortgage lender, or your credit union.

Both of these bills allow your financial provider to be a voluntary reporter of elder abuse. In other words, your banker can make a report to your local adult protective services agency if he or she suspects that something in your account may be financial abuse. I don’t really have a problem with that part (with the caveat, of course, that you should be able to opt out of this and prevent your financial information from being disclosed at all.) But there’s more. Some of the concerns are below, but these are just a few. If you would like a detailed explanation of  the concerns about each of these bills, click here.

If you are 60, you are vulnerable. First, let’s start with how the bills define a “vulnerable adult.” This is the person to whom these new procedures could be applied. A “vulnerable adult” in both bills is defined as anyone who is 60 or older!  Now, I work with a lot of people who are in their 60s, on issues like estate planning, guardianship of a special needs child, or elder law concerns regarding their older parents. My husband is 62. I can tell you, he is anything but vulnerable. Bill Gates is 64. Hmmm. Is he vulnerable?

How about Oprah? She is 65. She must be really vulnerable at that age (just kidding, Oprah.) She isn’t. Bill Gates isn’t, and my husband isn’t. Neither are the people I work with who are in their 60s, barring a diagnosis of early onset dementia or some type of illness affecting their cognition. But all of them could have their account transactions frozen under these two bills.

Having a standard age, especially one as young as this, without some objective evidence that the person is actually unable to care for their own financial matters, or is truly vulnerable to exploitation or influence, is a real insult to the autonomy of most individuals. It is ageist. Even if the standard age were 90, it’s time to recognize that age alone is not a sign of vulnerability. I have 90+ year old clients who are “sharp as a tack.”

It would be far better to use the definition in Wisconsin’s protective services law, which is not tied to age: “any adult who has a physical or mental condition that substantially impairs his or her ability to care for his or her needs and who has experienced, is currently experiencing, or is at risk of experiencing abuse, neglect, self-neglect, or financial exploitation.”

Account transactions can be frozen for long periods of time: Both bills allow the financial institution or investment professional to freeze a transaction on your account if the institution or advisor has “reasonable cause” to believe that financial exploitation is occurring, has occurred or may occur.  This means, without your consent, a transaction could be dishonored or stopped for a period of time. In SB 20, the “initial” period of the freeze is 15 days and can extend to 25 days. In SB 19, it is 5 days, but can be extended indefinitely. While these freezes are in place, you are potentially incurring bounced check fees, late fees or other penalties, none of which are required to be waived or paid by the institution.

Reasonable cause is not defined: These bills allow a transaction to be frozen if the provider has “reasonable cause” to believe that financial exploitation has occurred, is occurring or is about to occur. However, there is no definition for “reasonable cause.” It is whatever the banker or financial advisor says it is.

Hmmmm what is reasonable cause?

The bills could be improved by adding clear definitions of “reasonable cause” and requiring that the facts be documented in writing.

What is even worse, is that neither bill requires the financial services provider to receive any training regarding financial abuse or elder abuse.  So now, untrained individuals are making judgment calls on an undefined standard, and exercising control over your money.

You can’t get out of it: There is no provision in either bill for you, as a customer, to knowingly “opt out” of this “protection” or better yet, to knowingly “opt-in.”   In a free country, a person should be able to decline the “protections” that the government wants to impose, particularly on the person’s hard earned finances.

Your power of attorney can be disregarded: SB 19 eliminates protections that were put into Wisconsin’s financial power of attorney law. The bill allows a financial institution to disregard your durable power of attorney (DPOA) if they believe your agent is perpetrating financial abuse.  The ability of banks to refuse DPOAs is exactly what Wis. Stat. § 244.20 — the statutory prohibition on refusing a power of attorney —  was intended to remedy after a long history of financial institutions refusing to accept powers of attorney for inappropriate reasons, such as the fact that the documents was not on the bank’s preferred form or was more than 6 months old. § 244.20 was the product of hard work by elder law attorneys in Wisconsin and protects individuals against arbitrary refusal of a properly drafted power of attorney. Proposed § 224.46(4) does an end run around the protections of this section.

No Liability for Mistakes: Both bills relieve the financial institutions of any liability if they act in good faith and with reasonable care under these provisions. You may suffer considerable financial damage if the institution acts in error, but you have no recourse. Also, it is not clear who will be stuck with all the bounced check charges, later fees and other consequences that would come from an error in delaying a transaction. Worse yet, if the customer (or his or her agent)  is in the middle of applying for Medicaid, the application could be denied if funds are not distributed (“spent down”  in a timely fashion, costing tens of thousands of dollars.

I’m not blind to the issue of financial exploitation of vulnerable adults. In fact, I am very well acquainted with issues relating to elder abuse.  Years ago, as the director of a non-profit program serving elders, I obtained one of the first grants from the State of Wisconsin to provide legal services to victims of elder abuse. I have trained professionals on Wisconsin’s Elder Abuse laws, and have trained attorneys on how to represent victims of elder abuse. My firm represents victims of financial exploitation. These are terrible cases. However, two wrongs don’t make a right. Curtailing the rights of individuals to handle their own finances, making their carefully drafted powers of attorney worthless, and relieving financial institutions from all liability create problems that could be even worse.

Call to action: You have the power to let your Wisconsin legislator know that these bills cannot be passed the way they are currently written. With some improvements, they could provide a real benefit. As currently written, the potential to harm individuals who are competently going about their own business with their finances is too high. You need to act quickly, so call or write today. Contact information to find your legislator is here: https://legis.wisconsin.gov/ simply write your address in the space on the right side of the page underneath the heading “WHO ARE MY LEGISLATORS?”  Tell them you OPPOSE SB 19/AB 46 and SB 20/AB 45

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In a Wiser 2021, Make Sure to Control What You Can.

On New Year’s Eve, my husband and I looked on with relief as 2020 left the stage. I would venture that so did many of you.

Over the course of a lifetime, I can remember more than one year where I was not at all sad to see it go. But those other years were more of an individual experience. It was related to one or more things that were personal to me, like the loss of a loved one or a difficult personal challenge. We all have had those years.

Bidding goodbye to 2020 with relief was a collective experience of our society as a whole. But let’s be honest: 2021 is not going to be a walk in the park either. We know that. And that is precisely the difference. On New Year’s Day in 2020, few of us would have predicted the terrible health crisis that was – even then –  moving along on its course of destruction. But on New Year’s Day 2021, we know what we are facing. If not every detail, we certainly have a good idea. This pandemic is far from over and will continue well into the year.

Much of 2020 was spent in the “pivot.” We went from what we were used to, to what we were not used to but had to adapt to. We all did the best we could.

What we learned at Wessels & Liebau: At our office, the “pivot” helped us deliver services more effectively to our clients and we will continue many of these things forever. We learned how to hold client meetings by video. This has been a godsend to many caregivers for loved ones with dementia. Instead of having to find time to get to the lawyer’s office and find care for your loved one, or bring them along with the stress that involves for them, it is now quite simple to have the same conversations over video conferencing, with less stress. I have had more than one client say how nice it was not to have to worry about traffic or feel the need to get dressed for business. We “met” with some clients while they were at their cottages! We miss what everyone misses in this time, the opportunity to meet over a cup of coffee, shake hands, and visit in person. We do feel that we will be able to have those experiences once again before too long. But we will continue to offer video meetings forever. 

We also got better at working remotely. Even when the pandemic is subsided, Wisconsin will still have bad weather. But now we know we can all get our jobs done from home, so our staff will not have to risk icy drives, and there will be fewer times we have to make the decision to close the office due to weather. Also, we learned to use parts of our case management system that make it easier for us to share documents with our clients securely, and vice versa.

“Zoom court” helped to save a lot of the time that is taken up in travel and waiting. We are hopeful that video conferencing will become a permanent fixture for non-essential court proceedings like scheduling conferences and uncontested matters. It saves our clients money, and makes us more efficient.

We creatively handled the need to get documents signed, with a variety of options depending on the document and the situation.

So many things that happened this year did not have easy answers from the legal standpoint. But we learned that being creative and persistent gets problems solved even when the solutions are not along the traditional paths. Our long-standing firm philosophy that it is more important to meet our clients where they are, than to be a traditional, formal firm that seeks to impress our clients with big words and complicated documents, served us especially well this year.

How we make the most of the lessons from 2020: It’s time to take what we all learned from the pivot and turn it into an advantage. Here are some ways I see this happening for our clients and other readers:

Planning ahead for long term care:  The devastating havoc that COVID 19 wreaked in long term care facilities had sweeping effects on our clients who have a loved one with dementia. Clients with loved ones in facilities faced terrible uncertainty regarding the health of their loved ones, and had to make decisions without the benefit of being involved in person. Residents’ opportunities to visit with loved ones were severely restricted and at times cut off altogether. Seeing this uncertainty, quite a few of our caretaker spouse clients who had been planning to admit their loved one to a facility in 2020 chose to delay that admission.

This is where careful advance planning can provide couples and caregiver family members with the most flexibility. Understanding ahead of time how important programs like Family Care will help to provide assistance to people staying at home, and to compare that with the system that provides care in nursing homes (Institutional Medicaid) helps people make better choices. It also helps  to plan ahead well before any admission to residential care, since this is when asset protection can be maximized. Getting a Family Care Snapshot at the right time can save tens of thousands of dollars and more.

If you are one of the many people who delayed seeking residential long term care for a loved one in 2020, and you have not already visited with an elder law attorney, now is the time to do so. Also, remember that if the work of caregiving longer than you planned to is affecting your health, or even if you just want some support, the Alzheimer’s Association has a free helpline ( 800-272-3900) and free video support programs. 

Understanding your estate plan: One of the recurring issues in 2020 was people who realized that even though they had estate planning in place, they had no idea how to use it.  Panicked calls from family members who needed to understand how a power of attorney worked, or what the documents actually meant, or what needed to happen when a loved one died, were extremely common this year. Whether or not we had initially done the planning for the clients, the 2020 clients still had questions about what the papers meant, since there is a huge difference between  the important initial steps of completing the documents, having them explained by the lawyer, then walking out with the fresh packet of signed papers, and actually using them. 

If you have not taken time to think through how your documents work, seek guidance from your attorney, or consider whether or not they are still reflective of your wishes and choices, 2021 is the time to do that. 

Making an estate plan if you do not have it:  For years, we have tried to get the message out that everyone over 18 needs an estate plan. At a minimum, the “living” documents like powers of attorney for health care and finances are necessary, even for young adults who don’t have an estate to worry about. The alternative if that young adult contracts a severe case of COVID and does not have powers of attorney, is a costly and stressful court proceeding for guardianship in order to make health care decisions. The article here helps you understand more about this.

We think that message is starting to sink in. Our anecdotal experience is that more people focused on getting estate plans in place in 2020 than in prior years. If you were not one of those people who did it in 2020, you will want to get it done in 2021. Start by reading the article linked in the paragraph above, then move on to the article here. 

Understanding the rights of residents in long term care facilities: Families with loved ones already in assisted living facilities or nursing homes were hit particularly hard with the effects of the pandemic. Many of the traditional “residents rights” were upended due to the need to protect residents and staff from the highly contagious disease. At the same time, it became particularly important for people to understand what resident’s rights were still supposed to be protected even in the pandemic. We do not think that these concerns will go away in 2021. Valuable free resources exist for families, including:

The National Consumer Voice in particular has a wealth of information on how COVID impacts residential long term care. 

People on Medicaid need to prepare for the state to resume recertifications and terminations: During the pandemic, administration of the program focused on the COVID crisis and suspended some of the routine procedures that apply to most people on Medicaid, such as requiring a 6 month or annual review of a person’s eligibility, making adjustments to the cost sharing for an individual, or issuing termination notices for people who had lost eligibility due to having more than the allowable amount of resources, or due to a divestment. This suspension is not indefinite. Emergency rules suspending these procedures are set to expire on January 31, 2021. While it is possible that there may be an extension of the leniency past January 31, at some point the rules will be enforced again. If you, your spouse or loved one is on Medicaid, it is a good time to be prepared so that you do not have a crisis when the rules are back in force. An elder law attorney can help you plan for this.

Going into 2021 with eyes open, the future looks a bit more in our grasp. I hope that to be true for all of us.

(Oh yes, and please wear a mask, wash your hands, keep a 6 foot distance, and be patient with the world.) 

 

 

 

 

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When “protection” goes wrong…financial exploitation bills introduced in Wisconsin go too far and need to be changed, not passed into law.

Sometimes, protection goes too far. That is what is happening in Wisconsin right now. Two bills were introduced in the Wisconsin Legislature yesterday. These bills purport to protect seniors from financial abuse. They are SB 428 (AB 482) and SB 429 (AB 481). However, the way they are currently written, in the guise of protecting seniors from financial abuse, these bills throw a competent person’s right to control their own finances under the bus.

SB 428/AB 482 (text here) relates to securities industries professionals. These are your financial advisors and investment brokers. Your Edward Jones, Thrivent, Morgan Stanley officers to name a few, as well as the smaller private brokers that you have trusted with your investments.  These are the people that hold your really big funds.

SB 429 / AB 481 (text here) related to financial institutions. This is your bank, big and small, local or national, your mortgage lender, or your credit union.

Both of these bills allow your financial provider to be a voluntary reporter of elder abuse. In other words, your banker can make a report to your local adult protective services agency if he or she suspects that something in your account may be financial abuse. I don’t really have a problem with that part (with the caveat, of course, that you should be able to opt out of this and prevent your financial information from being disclosed at all.) But there’s more. Some of the concerns are below, but these are just a few. If you would like a detailed explanation of  the concerns about each of these bills, click here.

If you are 60, you are vulnerable. First, let’s start with how the bills define a “vulnerable adult.” This is the person to whom these new procedures could be applied. A “vulnerable adult” in both bills is defined as anyone who is 60 or older!  Now, I work with a lot of people who are in their 60s, on issues like estate planning, guardianship of a special needs child, or elder law concerns regarding their older parents. My husband is 62. I can tell you, he is anything but vulnerable. Bill Gates is 64. Hmmm. Is he vulnerable?

How about Oprah? She is 65. She must be really vulnerable at that age (just kidding, Oprah.) She isn’t. Bill Gates isn’t, and my husband isn’t. Neither are the people I work with who are in their 60s, barring a diagnosis of early onset dementia or some type of illness affecting their cognition. But all of them could have their account transactions frozen under these two bills.

Having a standard age, especially one as young as this, without some objective evidence that the person is actually unable to care for their own financial matters, or is truly vulnerable to exploitation or influence, is a real insult to the autonomy of most individuals. It is ageist. Even if the standard age were 90, it’s time to recognize that age alone is not a sign of vulnerability. I have 90+ year old clients who are “sharp as a tack.”

It would be far better to use the definition in Wisconsin’s protective services law, which is not tied to age: “any adult who has a physical or mental condition that substantially impairs his or her ability to care for his or her needs and who has experienced, is currently experiencing, or is at risk of experiencing abuse, neglect, self-neglect, or financial exploitation.”

Account transactions can be frozen for long periods of time: Both bills allow the financial institution or investment professional to freeze a transaction on your account if the institution or advisor has “reasonable cause” to believe that financial exploitation is occurring, has occurred or may occur.  This means, without your consent, a transaction could be dishonored or stopped for a period of time. In SB 428, the “initial” period of the freeze is 15 days and can extend to 25 days. In SB 429, it is 5 days, but can be extended indefinitely. While these freezes are in place, you are potentially incurring bounced check fees, late fees or other penalties, none of which are required to be waived or paid by the institution.

Reasonable cause is not defined: These bills allow a transaction to be frozen if the provider has “reasonable cause” to believe that financial exploitation has occurred, is occurring or is about to occur. However, there is no definition for “reasonable cause.” It is whatever the banker or financial advisor says it is.

Hmmmm what is reasonable cause?

The bills could be improved by adding clear definitions of “reasonable cause” and requiring that the facts be documented in writing.

What is even worse, is that neither bill requires the financial services provider to receive any training regarding financial abuse or elder abuse.  So now, untrained individuals are making judgment calls on an undefined standard, and exercising control over your money.

You can’t get out of it: There is no provision in either bill for you, as a customer, to knowingly “opt out” of this “protection” or better yet, to knowingly “opt-in.”   In a free country, a person should be able to decline the “protections” that the government wants to impose, particularly on the person’s hard earned finances.

Your power of attorney can be disregarded: SB 429 eliminates protections that were put into Wisconsin’s financial power of attorney law. The bill allows a financial institution to disregard your durable power of attorney (DPOA) if they believe your agent is perpetrating financial abuse.  The ability of banks to refuse DPOAs is exactly what Wis. Stat. § 244.20 — the statutory prohibition on refusing a power of attorney —  was intended to remedy after a long history of financial institutions refusing to accept powers of attorney for inappropriate reasons, such as the fact that the documents was not on the bank’s preferred form or was more than 6 months old. § 244.20 was the product of hard work by elder law attorneys in Wisconsin and protects individuals against arbitrary refusal of a properly drafted power of attorney. Proposed § 224.46(4) does an end run around the protections of this section.

No Liability for Mistakes: Both bills relieve the financial institutions of any liability if they act in good faith and with reasonable care under these provisions. You may suffer considerable financial damage if the institution acts in error, but you have no recourse. Also, it is not clear who will be stuck with all the bounced check charges, later fees and other consequences that would come from an error in delaying a transaction. Worse yet, if the customer (or his or her agent)  is in the middle of applying for Medicaid, the application could be denied if funds are not distributed (“spent down”  in a timely fashion, costing tens of thousands of dollars.

I’m not blind to the issue of financial exploitation of vulnerable adults. In fact, I am very well acquainted with issues relating to elder abuse.  Years ago, as the director of a non-profit program serving elders, I obtained one of the first grants from the State of Wisconsin to provide legal services to victims of elder abuse. I have trained professionals on Wisconsin’s Elder Abuse laws, and have trained attorneys on how to represent victims of elder abuse. My firm represents victims of financial exploitation. These are terrible cases. However, two wrongs don’t make a right. Curtailing the rights of individuals to handle their own finances, making their carefully drafted powers of attorney worthless, and relieving financial institutions from all liability create problems that could be even worse.

Call to action: You have the power to let your Wisconsin legislator know that these bills cannot be passed the way they are currently written. With some improvements, they could provide a real benefit. As currently written, the potential to harm individuals who are competently going about their own business with their finances is too high. You need to act quickly, so call or write today. Contact information to find your legislator is here: https://legis.wisconsin.gov/ simply write your address in the space on the right side of the page underneath the heading “WHO ARE MY LEGISLATORS?”  

Posted in elder abuse, Elder Law, Financial exploitation | Tagged , | Comments Off on When “protection” goes wrong…financial exploitation bills introduced in Wisconsin go too far and need to be changed, not passed into law.

When the nursing home tells you Medicare is ending, know your rights!

I have the good fortune of spending the better part of this week in Fort Worth, Texas at a conference of the National Academy of Elder Law Attorneys. It’s at these events where I learn new ideas, solidify my thinking on issues I already know, and make new friends. I also get great ideas for things to write about. Today, Attorney Eric Carlson from the National Senior Citizens’ Law Center was talking to us about nursing home residents’ rights. My mind wandered to all of the clients I have worked with over the years who have had concerns and issues regarding something a nursing home was – or was not – doing. The issues related to nursing home rights are many, and at some point a family might feel like they are desperately trying to hang onto a bucking bronco that they have never ridden before and didn’t want to be on in the first place. This article focuses in on one of those challenging situations – when the nursing home says that a patient’s Medicare will be ending.

The setting: Mom is already in a nursing home. She was admitted two weeks ago for rehabilitation, after a hospitalization due to a stroke. Currently, Medicare is covering the costs of her care. Awhile ago, before the stroke, I met with the family to talk generally about Medicaid, because Mom also is approaching the mid stages of dementia and was considering a move out of her home.

I get a call or email from one of the family members who was in the earlier meeting. “The nursing home just told us Mom’s Medicare is ending in three days and we need to make plans for her discharge. Where is she going to go?!?”

My first thought is “WHOA NELLY!” (Maybe it’s the Texas air influencing my choice of words here.) Because this family has just been thrown into the ring of uncertainty and panic thanks to what someone at the nursing home told them, and we need to get a handle on what is really going on.

Luckily most times, “Whoa Nelly” is not what comes out of my mouth. Usually there are questions. The questions are important because each one relates to rights the person has and that we need to discuss. Many of these rights are found in federal regulations. I’ll provide some links at the end.

1. “Did they give you something in writing?”

When a nursing home determines that a patient no longer qualifies for Medicare to pay for that patient’s care, the nursing home must provide written notice in advance. The written notice must include, among other things, a statement that Medicare will be ending, the date it will end, the reason it is ending, and an an explanation of the person’s right to appeal. So, if no written notice has been given, the process has not formally been started. The patient has the right to receive that notice. A decent nursing home will give it directly to the competent patient or to the responsible agent of an impaired patient, and will provide the family with a compassionate person to explain what it means. But sometimes it is just found in a patient’s drawer.

If no written notice has been given, it doesn’t mean the nursing home is not trying to move the patient out. It just means they have not started the proper legal process.

2. “What is the reason they are giving as to why Medicare will end?”

When a nursing home determines that a patient no longer qualifies from a medical perspective to have Medicare pay for the patient’s care, the facility must explain the reason. (This rule does not apply for non-medical reasons such as the fact that the patient’s allotted Medicare days for payment have run out.)

The circumstances under which Medicare will pay for nursing home care are extremely limited, which is why Medicare is not a payment source for long term care in a nursing home. One of the coverage rules is that the care being provided must be daily skilled nursing care or skilled rehabilitation that is medically necessary. If a person has improved (or declined) to the point that they no longer need skilled care, it is possible that Medicare coverage will end. At that point, the family will need to pay privately, qualify for Medicaid, access Long Term Care insurance, or access other forms of payment that may be available.

On the other hand, if a person still needs daily skilled care, Medicare payment should continue (provided there are coverage days still available.) Unfortunately, there is an issue that comes up time and time again in these cases.

Family member: ” The nursing home says Mom has plateaued. She is no longer making progress in her therapy.” This ought to be a great big red flag, like waving a flag in front of a rodeo bull!

The fact that someone is no longer making progress is not in and of itself a reason for Medicare to end, if that person still needs daily skilled care or rehab to keep from regressing (backsliding) on the progress that has been made, or if daily skilled care is required for other reasons. Yet, it is a major reason nursing homes use to end Medicare and move people out.

Nursing homes trying to end Medicare coverage inappropriately because a person had “plateaued” was such a common violation that a class action called the “Jimmo” case resulted in a strong set of communications and directives to nursing homes from the government. But it still happens more than it should. A link to a toolkit for families in this situation is included at the end of this article.

3. “Do you disagree with the nursing home?”

I always ask this question because sometimes people agree that their loved one no longer needs skilled care, but other times they feel the patient could benefit from continuing the care. When a patient disagrees with the decision, specific appeal rights exist in Medicare termination cases. The notice must include the details about how to exercise those rights and families must act fast to exercise them.

What the notice does not tell you is this: if you decide to pursue an appeal you must insist that the daily care be continued! Most nursing homes will encourage the family to stop rehabilitation or go down to two times a week. But if you believe Medicare should keep paying, you cannot reduce the amount of care because Medicare only pays if daily care is given! ( Or at least 5 days a week in rehabilitation cases.) So it is a bit of a risk, since if the appeal is unsuccessful, the patient will have a higher bill to pay for the daily care. But if the appeal is successful, and it turns out the patient reduced the amount of care while the appeal was pending, the patient will probably end up paying even though he or she won the appeal.

4. “Do you need more time -or- do you want to stay in the facility?”

If the answer is “Yes” even in those cases where the family does not dispute the decision to end Medicare, I explain that the fact that Medicare is ending does not mean the person has to leave! The reasons that a nursing home can force a resident to leave are extremely limited and do not include simply the fact that Medicare is ending.

If a nursing home wants a patient out it must give a specific written notice of planned discharge that is different from the Medicare notice. The process of evicting a patient requires the nursing home to allow the tenant 30 days to move, except in very limited cases where less time can be given. The nursing home must also provide services to the patient to assist in planning for the discharge, and may not discharge that patient if there is not a safe place for the patient to go.

So, patients have options when Medicare ends. They can:

  • Dispute the written notice of Medicare termination;
  • Decide to move out if a safe place is available;
  • Stay in the facility and continue to pay privately;
  • Stay in the facility and  access other payment sources, or seek Medicaid coverage if the facility participates.
  • If they simply need more time but do plan to move, they can wait for written discharge notice and discuss discharge planning options.

During this time the patient may be liable for the cost of care if Medicare was properly terminated and no other coverage is available. But no family or client should feel pressure to move when they are not ready, or just because a nursing home staff told them verbally that Mom needed to move.

Each case is different, so in cases like this, patient’s need to be educated, get good advice and strong legal representation if it becomes necessary.

A good explanation of nursing home residents rights is here.

A toolkit that explains the Jimmo case and helps people advocate in those cases is here.

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Every Married Couple Needs to Understand what a “Snapshot” is and Why it Matters in Medicaid Planning

In Medicaid world, when I say “we need to get a snapshot,” I sometimes think my clients wonder where the camera is. Then, when we are done talking about this particular issue, I think we both feel as though it would be easier if we were talking about a Polaroid.  The Medicaid snapshot is a very important concept for married couples, and it’s also very confusing.  This article is to help you make sense out of it. At the end, you will see why it is very important to understand how important the snapshot date can be for your financial future.

An explanation of basic Medicaid “spousal impoverishment” rules.

When a couple is married, and one spouse needs nursing home care, or care in the community through Wisconsin’s alternative to nursing home care called “Family Care,” Medicaid will provide coverage of the cost of care if the couple meets financial eligibility rules. These rules are commonly referred to as “spousal impoverishment” rules but actually, that is a misnomer. The current set of rules regarding eligibility for married couples is based on federal law that was put into place by Congress to prevent spouses from becoming impoverished if only one needed nursing home care. Therefore, they really aren’t “spousal impoverishment” rules, they are spousal anti-impoverishment rules. But they are called “spousal impoverishment.”

The spouse applying for benefits is called the “institutionalized spouse” – whether in a nursing home or applying for Family Care.  The spouse who is not applying, and lives in the community – is called the “community spouse.” The “institutionalized spouse” could also be referred to as the “nursing home spouse” and I usually use that term when we are discussing Medicaid benefits in a nursing home.

Side Question: Why would a spouse applying for Family Care be called an “institutionalized spouse” when the whole point of Family Care is to keep people out of institutions by providing care and services in their homes? Answer: Because that’s just the way it is in order to apply the same rules.  Don’t try to find logic in it.

Assets: Under spousal impoverishment rules, the allowable amount of assets that the couple can have to qualify for Medicaid is called the “community spouse resource allowance” or CSRA. The CSRA is going to be a specific number. As of the posting date for this article, that number will in most cases be somewhere between $50,000 and $126,420, plus $2000 for the nursing home spouse. (In exceptional cases there can be adjustments through a hearing process.) The upper number changes every year. The trick is understanding how Medicaid comes up with the exact number that applies to the couple. And this is where the “snapshot” concept comes in.

Income: There are also rules related to spousal impoverishment income. These rules say that once the nursing home spouse is eligible (based on meeting the asset test described above), he or she may in some cases be able to transfer a certain amount of income every month to the community spouse.  But today we aren’t here to talk income. Because the snapshot is all about assets.

Now getting to the point – explaining the “snapshot”

In a nutshell, the “snapshot” is the amount of assets the couple had as of a particular date in time prior to the time they applied for Medicaid. That date is called the “snapshot date.”

Snapshot date:  The snapshot date is a specific date in time that is very important, but that most couples – at least those who have not read this article – have no idea is so important. In Medicaid legalese its official name is the “first continuous period of institutionalization.” You can see why we would rather call it the snapshot date. Figuring out what date is actually the snapshot date is done two different ways – depending on whether the person is applying for institutional Medicaid or Family Care.

Institutional Medicaid Snapshot Date: For institutional Medicaid (nursing home or hospital) cases, the snapshot date is the first day that the person went into a medical institution for 30 days or more. This is usually a nursing home, but a hospital can be a medical institution also.

For example, if Georgio had a stroke on March 1, 2019 and went into the hospital that day, stayed there for a week, and then went directly into a nursing home for several months, the snapshot date would be March 1, 2019. The key is that there needs to be a “continuous” period of institutionalization. If Georgio went home after his week in the hospital, stayed at home. then went into the nursing home on March 11th (a couple days after going home,) the snapshot date would be March 11th – assuming he did spend 30 days or more in the nursing home.

It’s also important that the snapshot date is the first continuous period of institutionalization so if Georgio had been in a nursing home for some reason two years before his stroke, from August 10, 2017 -September 25, 2017, then the snapshot date would be August 10, 2017, even if no Medicaid application was done at that time. For people whose first continuous period of institutionalization is several years in the past, it can be difficult to recreate financial records.

So remember, for institutional Medicaid the snapshot date is the:

    • FIRST – must be the first time person was in the hospital/nursing home for 30 days or longer
    • CONTINUOUS – must not have a gap such as a return home
    • PERIOD OF INSTITUTIONALIZATION – this means 30 days. Whether in a hospital, a nursing home, or a combination.

Family Care Snapshot Date: For Family Care,  the snapshot date has nothing to do with a stay in a nursing home! It is the date that a functional screen result concludes they met the “functional” requirements for Family Care. The functional screen results come on a paper that is dated. The date on that paper is the snapshot date.

In Family Care cases, many couples do not understand how the functional screen affects their financial future because it sets the snapshot date. This is something families need to get educated about. This screen is typically performed by someone from a local county’s Aging and Disability Resource Center (ADRC). Because this article is focused on the snapshot date, I will not explain this test in a whole lot of detail right now, except to say it is a complicated but necessary part of the Family Care application process. I typically spend part of an initial appointment with clients explaining it. What I do want to stress in this article is that the timing of that functional screen is more important than most people realize.

To make it a little more confusing, whichever of these two situations took place first can be used as a snapshot date. In other words, if a person in a nursing home for the first time had a functional screen a couple years ago, that date will be the snapshot date. If a person requesting Family Care was in a nursing home for 30 or more days, the date of that nursing home admission will be the snapshot date.

The Snapshot:  The snapshot is the amount of countable assets the couple had on the snapshot date. (Oh now we are getting to the point!) Remember in the section a few paragraphs ago when I explained spousal impoverishment assets? Well, figuring out how much the couple gets to keep is based on the snapshot.  For the snapshot, we add up everything the couple owned – on the snapshot date – that would be a countable asset for Medicaid. This includes: bank accounts, stocks, bonds, vehicles – except one, real estate that is not the home, cash value life insurance with a small exception, and most other liquid assets. Assets in the name of either spouse are counted, even if the spouses have a marital property agreement in place between them.  The house is not counted in this total in most cases. A few other things are not counted also, such as retirement funds that belong to the community spouse. An elder law attorney can help you understand more about what assets are and aren’t counted.

Once all of those countable assets are added up to make the snapshot, the spousal impoverishment formula says you get to keep half of those assets – but must not go higher than the highest number in the asset range (currently $126,420.)

Examples: If a couple has $120,000 on the snapshot date, their asset level in order to qualify for Medicaid will be $60,000. If a couple has $200,000 on the snapshot date, their asset level will be $100,000. Because of the rules regarding minimum and maximum, if a couple had $80,000, even though the general formula of “half” would be $40,000, that would be less  than the minimum of $50,000,  so in that case the target for the couple is $50,000.  Similarly, due to the maximum, if a couple has $500,000 on the snapshot date, their target level will be $126,420 even though that is far less than half. In all of the above cases, the institutionalized spouse also gets to keep another $2000.

This leads to the phrase I repeat to my clients until they “get it”: Half of more is more, half of less is less. The more you have on the snapshot date, the more you get to keep!

Helpful tips: All of this boils down to the fact that you need to understand why the snapshot matters. Now that you know what the snapshot is, you can do a few things. Of course, the amount of control you have depends quite a bit on whether you can control the snapshot date. In some cases, such as a stroke or other emergency hospitalization that leads to a long period of care, you have no control.

  • Keep records when a loved one goes into a hospital or nursing home. Preserve records regarding the date the person went into the hospital or nursing home, and if it turns out the stay in hospital / nursing home is more than 30 days, make a folder with all of the person’s assets on the snapshot date. Bank and brokerage statements, insurance statements, stock records, vehicle description / blue book value, etc. Keep that folder as long as the spouse is alive.
  • If you believe your spouse will need long term care, for example if your spouse has recently been diagnosed with dementia, make sure you see an elder law attorney before you are too far down the road so that you learn what you can do – if anything – to maximize your snapshot.
  • If your assets are between $100,000 – $253,000, understand you are in the zone where the more you spend before a snapshot date, the lower your snapshot will be. It is particularly important that you be strategic about your situation if you have any control over it.
  • If you are considering Family Care,  you will want to make sure all of your ducks are in a row before getting that functional screen, particularly if you are one of the couples whose countable assets are within the range between $100,000  and about $253,000. Couples in that target range will want to make sure they do not spend money on discretionary big-ticket items before getting the screen.
  • There are things you can do proactively to raise the level of your assets in anticipation of that snapshot. You really need to talk to a lawyer to understand all of these options and to be smart about the process.
  • If a nursing home social worker or billing person, or a government employee tells you “you need to spend down to $50,000 and then you can get Medicaid,” do not immediately believe that statement. See my article here.

 

Posted in Elder Law, Medicaid, spousal impoverishment | Comments Off on Every Married Couple Needs to Understand what a “Snapshot” is and Why it Matters in Medicaid Planning

What a will…won’t.

This article is about the basic misunderstanding most people have about wills. Here is how my average meeting starts when people schedule an appointment to talk about a will:

Me: I understand that you would like to talk about your estate planning.

Client: Yes, I need a will.

Me: I can definitely help you with that. Can you tell me what you want the will to do for you?

Client: Well, when I die I want to divide my estate among my children and I don’t want a probate. So I want a will to say where things should go.

Me: Ahhh, I understand.

Now it is time for me to become the Legal Mythbuster.

Me (again): We need to talk about what a will WON’T do. A will WON’T avoid probate.

Client: WHAT??????

Surprising as it is, this is the truth of the matter. A will is a document that contains a number of directions for how things are to unfold with your estate after you die. It includes your choice of person who will have legal authority to manage the affairs of your estate (“executor” or “personal representative.”) It includes any special provisions you have for certain types of beneficiaries, such as children. And ultimately, it says who gets what. However, none of those instructions are legally effective until the will is admitted for probate in a court of law. And the only way to admit the will in court is to open a probate case. That’s just the way it works.

Another related issue that people don’t understand is that the will only controls property that has to go through probate. Many things don’t go through probate. Let’s say that a person wants their assets divided between their four children equally. But during the course of their life, they added one child as a joint account holder on a checking account, and named another child as a beneficiary of a life insurance policy. They also have an IRA that names all four children. None of these assets actually goes through probate at the death of the person, so the will is meaningless with respect to those assets. Regardless of what the will says, the joint account will go to the child who is the remaining joint account holder. The life insurance will go to the one child who is named. And the IRA will be divided between all four children without a probate.

I think it is often a good thing when a client has assets that are all set up to pass to named beneficiaries without probate. That saves a lot of money. This can be done with beneficiary designations, joint accounts, or a trust arrangement.  The best plan is based on a person’s particular circumstances so it is something to discuss with an attorney. The key is to make sure that the non-probate plan is consistent with the way the client wants things divided at death.

In some cases, it is important that assets DO go through probate. When one spouse is on Medicaid, it is important for the other spouse to have an estate plan that involves a “testamentary” trust which can only be set up through probate.

Even with a good non-probate plan, it still makes sense to have a will. For example, we may assist a client in putting together a comprehensive “living trust” arrangement, which involves making sure all of the client’s assets are properly connected to the trust so that they will pass without probate when the client dies. But we still do a will.  Why? Because even the best planning cannot anticipate everything.  What if the reason the client dies is due to a terrible car accident that was not the person’s fault? Then there may be a legal cause of action against the individual who caused the accident. But since the client is deceased, we need to open a probate so there is a person with legal authority to pursue the claim, and since the proceeds of the claim were not in the client’s estate when he or she died, we need the will to transfer them in the manner that the client would have wanted.  So the will is necessary even though all other assets were set up to pass without probate.

This does not mean a will is not a good estate planning tool. It is good as long as you understand what it will and won’t do. If you want more information about that, and about the other options that exist, ask a good attorney.

 

 

 

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The most important estate planning documents that everyone over 18 needs (hint: not a will.)

I cannot tell you how many times I have had clients in my office who were very concerned because they “need a will drawn up.” There is nothing wrong with this. We help clients with wills, and trusts, and all kinds of arrangements to make sure their stuff goes where they want it to after they are on their way to the Great Beyond. The thing is, the clients who are focusing on getting a will are often missing the more important documents for the Here and Now.

In my opinion, which after 30 years of working with clients is admittedly not always so humble (because I like to think I usually know what I am doing at this point) wills and other post-death planning are secondary. The most important documents you need to put in place are those that will help make sure things are handled correctly during your life. Because while you are alive, it is still very important to YOU that someone is making health care decisions that reflect your wishes if you cannot make them yourself, and that some one is managing your finances appropriately when you cannot.

The most important estate planning documents are (drum roll please)

  1. A power of attorney for health care: This is a written document where you (the “principal”)  choose people (known as your “agents”) who can make health care decisions in the event you cannot. Typically, you will name one individual who will act as your primary agent, and then another one or two individuals who will act in succession if your first pick cannot.
  2. A durable power of attorney for finances and legal matters: This is a written document where you – the principal – choose one or more agents to handle your financial and legal matters. Again, you will typically select one person as the primary agent, then name one or more people to act in succession.

Wait, my spouse can’t make decisions for me? Most people are shocked when I tell them that in Wisconsin, even a spouse cannot make legal decisions on their behalf unless that spouse has been appointed as their agent. There are limited exceptions, such as limited health care decisions or the ability to act with respect to a joint bank account. But as a whole, nobody, not even a spouse or parent, can handle another adult’s health care or finances unless they have been appointed as agent in a legal document.

The importance of this point was driven home when my son Ken happily went off to college at age 18. One of the first weekends there, he was goofing off with friends, fell and got a concussion. I got the call from the hospital and realized in a panic that this highly-experienced attorney had let her son go off to school without doing powers of attorney! While I normally never coerce my clients to sign these documents, I should confess I put some “pressure” on him to get them done as soon as possible after that little mishap.

More details on the power of attorney for health care:

A power of attorney for health care is not only the necessary tool to make sure you control your health care even when you cannot make decisions anymore, but it is also a gift to your loved ones. Typically when I am drafting a power of attorney for a client, I will go into detail about the client’s wishes and preferences for certain types of care, such as long term care, artificial nutrition and hydration (feeding tubes and IV nutrition), end of life treatment, certain kinds of mental health treatment, and addressing some of the common issue that come up when a person has dementia. To the extent we can, we include information in the document so that it acts as a roadmap for the “agents.” I also strongly encourage clients to have frank discussions with their agents.

Typically, the agent’s authority to start making decisions about your health care will only become effective if there has been a certification that you cannot make those decisions for yourself. Typically this requires the written statement of opinion by two physicians, or a physician and a psychologist. However, a person could choose a different process – such as making the agent’s authority immediately effective – and include that in the power of attorney document.

There are helpful tools that I encourage clients to review and use, such as those that have been developed by The Conversation Project. Click  here for  a link to their “starter kits” for health care conversations. By having these conversations, a person provides guidance to the agent so that the agent can carry out the person’s wishes.

As part of the health care power of attorney, I recommend you also include:

  • Medical releases (called “HIPAA releases”) that allow your named agents to get information about your health from your medical care providers.
  • “Living will” language that details your preferences for end of life treatment. This is intended to be a direction to your physicians about whether or not to use or continue life-sustaining measures, even if your named agent is not available to act.  In Wisconsin this can be done as a separate document, but it can also be incorporated directly into your power of attorney, which is how I handle it. I do it that way because I think the end of life discussion requires a broader approach than the limited circumstances included in the living will language.

The State of Wisconsin has developed forms that can be used for the Power of Attorney for Health Care and the Living Will. These can be found at this link.  All in all, I think the health care related forms that have been done by the State of Wisconsin are good. There is no reason a person could not use these in a pinch. Also, the State Bar of Wisconsin has produced an excellent book called “A Gift to Your Family” which is available for a small fee, and at some times of year (often in April) is available for free.  This book goes through the process for putting together a power of attorney for health care and includes a copy of the state form and other supplemental documents. In Ozaukee county where my office is located, the local bar association holds a free clinic each fall to assist residents in completing powers of attorney for Health Care.

It is helpful to have the guidance of an elder and special needs law attorney in putting a health care power of attorney together, although you are not required to use an attorney. The help of an attorney can ensure that the document is executed and witnessed correctly, and that it includes some of the broader language regarding your preferences that is not in a standard form.

More details on the power of attorney for finances:

The power of attorney for finances is a comprehensive document that allows your agent to take action on your behalf in regard to financial and legal matters. You can choose how much or how little power you want to give your agent. This should be carefully done in consultation with your attorney, because the decisions involved in this document should be made with adequate advice.

The kinds of powers that can be included in a durable power of attorney range from simple transactions such as handling your bank accounts and paying your bills, to complex transactions such as creating and funding a trust on your behalf. You can choose to give your agent the power to make gifts or change beneficiary designations, which are very significant powers. You can also give your agent the ability to handle applications for benefits such as Medicaid, or to arrange for care of your pets, or to exercise powers related to marital property, such as signing a marital property agreement. Your agent could also bring a lawsuit on your behalf, buy and sell real estate, or run a business. The potential scope of power is very broad, which is why it is important to understand the pluses and minuses of each thing.

There is also a form available for this in Wisconsin, but I absolutely do not recommend it. The Wisconsin form is incomplete, inadequately explained, and likely to create problems down the road for anyone who needs to engage in Medicaid planning.  (Keep in mind that my opinion on this is not humble. It is based on years of experience having to fix the problems that were created when a person used the state form power of attorney for finances.)

A power of attorney can also be used inappropriately by an agent with ill intent, or by an agent who does not know his or her role, and therefore it is extremely important that you carefully consider who to name as your agent, and that your agent be appropriately educated about his or her duties. Also, be aware that if your agent acts inappropriately, he or she can be prosecuted criminally or pursued in civil court.

My spouse has Alzheimer’s. Is it too late for him to sign a power of attorney?

In order to execute a power of attorney, a person must have “capacity.”  This means the person must have the appropriate level of understanding to know what he or she is doing. Many people who have Alzheimer’s will have capacity to do estate planning such as powers of attorney for quite awhile after being diagnosed. Even in cases where a person’s health care power of attorney has been “activated,” the person may still have capacity to do a new power of attorney if it becomes necessary. It is a person-specific issue, so it is important to get advice and input from an elder law attorney and if necessary, the person’s physician.

What if I become incapacitated and I don’t have powers of attorney?

Well, if you have not executed power of attorney documents, and you are an adult (18 or over) then if you become incapacitated it will be necessary for someone to go through the court process of having you declared incompetent and being appointed your guardian. Not only is this process costly and stressful for everyone involved, it also puts the courts in charge of decision-making and many aspects of your life, and the guardian must obtain permission from a court for certain significant decisions.

More tips:

Below is a list of additional considerations and tips about these two documents.

  • DO: execute both documents – or a combined document that meets all necessary legal requirements (such as witnesses) for both.
  • DO: Consider carefully the powers that you want to give your agent, and those that you do not want to give. Get advice on the consequences of your choices so as to avoid a result you did not intend.
  • DO: Pick an agent who is willing and suited. The person who would handle your finances well may not be the best person to make medical decisions, and vice versa.  Talk to your intended agent to confirm whether he or she is willing to serve if needed. Take special caution in considering an agent whose geographical location or practical life circumstances (such as a job with lengthy periods of travel) would make it difficult for that person to act quickly or over an extended period of time.
  • DO: discuss your wishes with your agent before problems arise, so that he or she has the best possible information upon which to act.
  • DO: Give copies of the documents (not originals) to your agents, as well as to all of the professionals, institutions and others who would need to know that the documents exist.
  • DO NOT:  Appoint “co-agents.” This can create a situation where your wishes are not followed if both “co-agents” cannot agree or cannot be reached. It is better to appoint a single agent with instructions that the agent consult with the other person whenever possible.
  • DO NOT: Sign a Power of Attorney document that someone else has drafted, without reading it thoroughly.
  • DO NOT: Lock your document away in a safe deposit box, attorney’s office or other place that is not immediately accessible, unless you have distributed copies.
  • DO NOT: Give away “gifting” power lightly. Educate yourself on the types of “gifting” power, the consequences, and the ways to phrase these powers to make them most effective for your individual purposes.
  • DO NOT: Wait until there is a crisis to execute a Power of Attorney. Do it now!

 

 

 

Posted in Elder Law, Estate Planning | Tagged , , | Comments Off on The most important estate planning documents that everyone over 18 needs (hint: not a will.)