Elder Law Focusing on the Legal Needs of the Elderly J. Gregory Wallace Monroe, Wyne, & Wallace, P.A. Raleigh, North Carolina Health & Personal Care Planning “Advance Directive for a Natural Death” Living Will •Three situations set out for possible application: •incurable or irreversible condition that will result in death within a relatively short period of time, •or having advanced dementia or similar condition that results in the loss of substantial cognitive ability, •or have become unconscious and not expected to regain consciousness Living Will Statutory Form Declaration of treatment wishes for each option are to direct that the medical personnel may withhold or shall withhold: Life-prolonging measures and/or Artificial nutrition and/or hydration Living Will Statutory Provisions •A person cannot be required to sign a declaration as a condition for receiving any medical treatment •Declaration may be revoked without regard to person’s mental or physical condition •Declaration does not authorize an affirmative or deliberate act to end life other than to permit the natural process to take place Health Care Power of Attorney Controlling decisions about your medical care •Statutory model in N.C.G.S. Chapter 32A •Model is a springing power, requiring determination of physician or physicians that principal lacks sufficient understanding or capacity to make or communicate health care decisions •Terminates on revocation, or upon death of grantor Health Care Power of Attorney •Shall not confer any power with respect to property or financial matters, but health care agent may contract for health care services and may incur reasonable costs for them Powers of Attorney Definition of POA • A written instrument • By which one person (the “principal”) • Appoints another person or persons as his agent (the “attorney-in-fact” or “agent”) • Grants authority to agent to perform certain acts on behalf of the principal • Creates an agency relationship between principal and agent General or Special POA • Special Powers of Attorney are limited in duration or in scope of action. • “… for one year from date” • “to execute all documents required for the sale of my home at …” • General Powers of Attorney grant the agent the authority to perform any act that the principal may delegate to an agent. Durable Powers of Attorney • Common Law terminated agency relationship on death or incapacity of the principal. • Durable Power of Attorney survives incompetence or incapacity • Language must be contained in document to show principal’s intent that it survive his incapacity • Terminates on revocation or upon death of grantor Recording and Filing Durable POA • Durable Power of Attorney must be recorded in Register of Deeds’ Office to continue to be effective upon grantor’s incompetence or incapacity • In County where principal has principal place of residence, and/or • In County where principal owns real estate. • Then file with Clerk of Superior Court and file inventory and accountings as with guardianship – unless the POA waives rendering inventory and accountings. 2006 Formal Ethics Opinion 11 • Opinion rules that, outside of the commercial or business context, a lawyer may not, at the request of a third party, prepare documents, such as a will or trust instrument, that purport to speak solely for principal without consulting with, exercising independent professional judgment on behalf of, and obtaining consent from the principal. • Extends 2003 FEO 7 to all personal documents and issues. Gifting Powers in POAs Gifts under Short Form POA • If gifting is chosen, the agent is allowed to make gifts “in accordance with the principal’s personal history of making or joining in the making of lifetime gifts.” • If gifting authority is omitted, in short form or any POA, then gifting is considered under the statutory default of NCGS 32A- 14.1 NCGS 32A-14.1 Default Gifting • If the POA shows principal’s intent to give agent full power to handle principal’s affairs or deal with his property, the agent has authority to make gifts • in any amount • to any person or charitable organization • in accordance with the principal’s personal history of making lifetime gifts • Except no gifts to agent himself or his estate or creditors without Court order • However, if there are two agents, they may make gifts to each other. Excluding Gifting from POAs • Omitting gifting from a general power of attorney does not exclude that power entirely under NCGS 32A-14.1 • Principal must specifically exclude gifting if he does not want the agent to have that authority. • “This Durable Power of Attorney shall in no way be construed to grant the power to make gifts of my property to third parties or to the agent(s) as individual(s), nor to revise, revoke, or execute estate planning documents for me.” Gifting Limited to Annual Gift Tax Exclusion • Many bank-originated POAs include this type of gifting clause because their paradigm is gifts made to next generation. • Idea is that those having taxable estates need to be careful not to exceed the $12K annual gift tax exclusion • “The power to make gifts of my real or personal property or my interest in such property to my children, grandchildren, great-grandchildren and their spouses in amounts not to exceed the annual exclusion for federal gift tax purposes at the time the gifts are made…” Broader Gifting Authority • Many ways to state broader gifting authority. • Key is whether there is an objective limitation or whether it is entirely at the discretion of the agent. • “The power to make gifts of my real or personal property or my interest in such property to any person or entity, including any church or other charitable organization, including any person who may be acting as my Attorney-in-Fact, in amounts and in such manner as my Attorney-in-Fact may deem appropriate…” Balancing Broad Gifting with Oversight • There are good financial and planning reasons for having broad gifting authority, but the agent must be aware of issues of Medicaid sanctions, capital gains and gift taxes, and testamentary wishes. • One way to control unchecked gifting is to require in the POA that gifts require the approval of a neutral attorney or accountant. • Typical language might be as follows: “Notwithstanding the gifting provisions I have set out in this paragraph, no gifts shall be made from my estate except upon review and written certification of an attorney or a certified public accountant that such gift is appropriate and is consistent with the purposes expressed herein….” Public Benefit Programs Medicare, Medicaid and Special Assistance Medicare Part A - 2008 • Hospital Coverage - First 60 days for each “spell of illness” with $1,024 deductible • Co-insurance $256/day for hospital days 61-90 • 60 reserve lifetime hospital days with co- payment of $512/day • Nursing Home rehab – 20 days full, up to 80 additional days with $128/day co-pay • Home Care rehab and Hospice benefits Medicare Part B and Medigap • Physician’s Fees • Outpatient Care • Medical Equipment Rental • Part B costs $96.40 in 2008 with income-related premiums for those over $80K • Annual deductible of $135 in 2008, then 20% copay • Medigap policies cover deductibles and copays Medicare Part D • First-ever federally subsidized drug program for seniors, in which private health insurers will offer limited insurance coverage of prescription drugs to elderly and disabled Medicare recipients. • National average annual premium expected to be $386, or about $32 per mo. • $250 deductible, plan pays 75% of next $2,000 of drug costs during the year • Individual pays all of the next $2,850 of annual drug costs (the “doughnut hole”) • Plan pays 95% of all remaining drug costs over $5,100 for the year. Medicare Part D • Each drug plan will offer a different formulary, and the same drug may vary in price from plan to plan • The most important job for a Medicare beneficiary signing up for Part D is to determine whether the prescription drugs they need – or anticipate needing -- will be covered under a particular plan and how much they will cost. • www.medicare.gov has a comparison tool to allow you to search for Medicare private drug plans in your region and compare their costs, covered drugs and pharmacy networks Medicare Part D • Original beneficiaries who wished to enroll in the drug benefit program had between November 15, 2005, and May 15, 2006, to choose a plan without paying a penalty. • Open Season for enrollment each year is November 15 through end of year. • 7-month window for enrollment opportunity around person’s date of eligibility for Medicare. Medicare Part D • For those who have high drug costs and no drug coverage now, or who qualify for a low-income subsidy, Medicare Part D may be a huge help. • The poorest among the elderly and disabled will pay virtually nothing for their drugs. • For those who may not be able to afford the premium and who don't have high drug costs, it's a tougher call. • Those who continue with a drug plan that is equal to or better than Medicare's will not be assessed a late enrollment penalty. • Those who sign up with Medicare Part D will lose their current drug coverage and risk losing all their health benefits under their private plan. Housing Issues Staying at Home • Depends upon health, personal financial resources and available assistance in the community • When health fails, supervision by family, friends or paid attendants is necessary • Around-the-Clock attendant care will easily cost $60,000 to $140,000 per year, more if nurse is required. Staying at Home • Ancillary home services: • Meals on Wheels • Senior financial counseling • Waiting lists for service • Adult Day Care (Total Life Centers) • Can extend time a person can live at home and provides respite for caregivers • Cost is about 1/3 to 1/2 of institutional care • Should have supervision and visits by nurses or physicians Staying at Home - Accessibility • Modifications to home can extend time a person can stay at home • If ordered by physician, mods may be deductible medical expenses • Ramps and accessible showers • Add-on guest room for attendant or family caregiver. Using LTC Insurance to Stay Home • Look for home health care rider in LTC policy – note cost of rider vs. benefits • This insurance may cover cost of limited attendant care and case management • Read the Policy! Be aware of the limitations on home care. • Rarely can family members be paid, and they won’t cover 24-7 nursing care. Using Equity – Reverse Mortgage • Mortgage-free property may be most valuable asset. • With goal of staying home, access to equity may be critical. • No payments until death, sell house, or permanently move out. • Must receive counseling (Resources for Seniors in Wake County) about terms. Accessory Apartment or Room • Some children invite parent into child’s home or add-on apartment • Wise to formalize any financial arrangements in writing. • ECHO – Elder Cottage Housing Opportunity AARP initiative to provide modular cottages for seniors on child’s land – but beware of zoning issues. Congregate Care Facilities • “Independent Living” • Separate apartments • Some housekeeping services • One or more daily group meals • Usually no personal care or health oversight Adult Care Home • “Assisted Living” • Room, meals, help with ADLs, and medication supervision • May have protective supervision by electronics or secured wing • NC uses regulatory terms Adult Care Home and Assisted Living Facility Nursing Homes • Long-term care institutions that provide nursing care and other specialized services • Most are certified under Medicare, Medicaid, or both. Continuing Care Retirement Community • Retirement facilites that provide shelter, health services and support services for as long as one lives in the facility. • Usually a one-time entrance fee, though newer business models include purchasing your unit • Adjustable monthly fees, depending on level of care needed. Paying for Institutional Care Cost of Institutional Care • Average Private Pay Cost of Nursing Home Bed in Wake County is over $6,000.00 per month • Average Private Pay Cost of Assisted Living Bed in Wake County is between $2,500.00 and $4,000.00 per month Who Pays for Institutional Care • NOT Health Insurance Plans (usually) • NOT Medicare • Income, Savings, Investments • Long-Term Care Insurance • State-County Special Assistance for Assisted Living • Medicaid for Nursing Home Care Medicaid & Special Assistance • Medicaid is a Federal-State program to help the aged, blind and disabled pay for long- term care in a NURSING HOME. • Special Assistance is a State-County program to help low-income people pay for ASSISTED LIVING care in an adult care home. Special Assistance • Since July 1, 2002, SA program has become significantly LESS available. • Income cap of $1,239.00 per month for applicant (2008); no maintenance allowance for spouse • Asset cap of $2,000.00; no resource allowance for spouse, except for home, contents, and one automobile. Special Assistance • Assets held jointly with spouse are entirely countable to applicant, but transfers to spouse are NOT sanctioned. • Assets held solely by spouse generally not countable to applicant. • SA’s Medicaid-like sanction for transfers of countable property to anyone (other than spouse) will cause a disqualification of 1 month for each $2,000 of gifts Medicaid • Three areas of qualification: • MEDICAL - must require Intermediate or Skilled Nursing Care - Nursing Home levels of care • ASSETS - “countable assets” of applicant may not exceed $2,000.00 • INCOME - except for small personal needs allowance and possible spousal support, income must be used to pay nursing home costs. Practical limit is that income must be less than Medicaid would pay for nursing home care - about $3,500 per month Medicaid • Income: • Medicaid Patient KEEPS $30 per month • If spouse has less gross income than $1,750 per month, augment spouse’s income • If spouse has more than $525 per month of housing expenses, consider excess housing expenses • Remaining income used for medicals and nursing home cost – Medicaid pays balance. Medicaid • Non-Countable Property Includes: • Personal residence (under certain circumstances) • Personal possessions: clothing, furniture, appliances and jewelry • One motor vehicle • Income-producing (real) property -- but not more than $6,000.00 worth • Assets of certain family businesses • Inaccessible assets Medicaid • All property of both spouses is counted. • The applicant spouse may keep non-countable assets and not more than $2,000 of countable assets • The spouse remaining in the community may keep non-countable assets and half of the couple’s countable assets, but not less than $20,880 and not more than $104,400 (2008) Medicaid • MYTH: I can only “spend down” my assets on medical or nursing home bills. • Pre-need funeral plan(s) and burial plot(s) • Pay off mortgage or consumer debt • New automobile • Home repairs, furniture, appliances • Term life insurance • Gifts??? (Hold that thought) Gifting to Spouses • Both Medicaid and Special Assistance treat the spouse specially: • No sanctions are imposed for gifts or transfers to spouses. • SA does not count spouse’s assets at all • Medicaid allows spouse to keep outright a certain amount of the couple’s liquid assets: the Community Spouse Resource Allowance. • Additional assets may be protected for spouse’s benefit. • All transfers to spouse involve gifting • Many transfers to spouse involve POAs or Guardianships Special Assistance Gifting • Gifts made within three years of applying for SA are sanctioned at the rate of one month per $2,000 given away. • Sanction calculated from month after gift • If gifting is properly staged, $72,000 can be given away during the three-year “lookback period” • Principal’s cost of care must be privately paid during period of sanction. *Medicaid Gifting * Gifts made prior to November 1, 2007: • Gifts made more than three years prior to applying for Medicaid generally do not count against applicant. • Gifts made within three years of applying for Medicaid are sanctioned at the rate of one month per $5,000 given away. • Sanction calculated from month of gift • Principal’s cost of care must be privately paid during period of sanction. Pre-NCDRA Sanction Period Lookback NCDRA 10/1/05 11/1/07 $50,000 Gift $50,000 Gift Application 1/1/06 8/1/07 10/1/08 Gift of $50,000 made before effective date of DRA is sanctioned under Old Medicaid Rules. 10 month sanction begins in January, 2006, and again in August, 2007. No sanction in effect at date of application. *Medicaid Gifting * Gifts made on or after November 1, 2007: • Gifts made prior to 11/1/07 are considered under old law. • Gifts made within five years of applying for Medicaid are sanctioned at the rate of one month per $5,000 given away. • Sanction calculated from month of Medicaid qualification. • Principal’s cost of care must be privately paid during period of sanction. DRA Extension of Look-Back NCDRA 1/1/09 11/1/07 $50,000 Gift $50,000 Gift Application 1/1/06 12/1/07 10/1/09 Gift of $50,000 made before effective date of DRA is sanctioned under Old Medicaid Rules. 10 month sanction begins in January, 2006. Gift of $50,000 made after effective date of DRA is sanctioned under DRA provisions. Post-NCDRA Penalty Period NCDRA 11/1/07 $50,000 Gift Application 12/25/07 6/1/12 Gift of $50,000 made after effective date of DRA is sanctioned under DRA Medicaid Rules if application made after effective date of DRA in NC. 10 month sanction begins in June, 2112. "How will older Americans, as well as their middle aged children, use the income, savings and property they have acquired through a lifetime of hard work to provide them with access to quality health and long-term care for the remainder of their lives?"