Articles Posted in Elder Law

You’ll likely come across the term “incapacitated” while planning with an attorney for your future and addressing challenges that may come along with aging. In this post, I’ll write about how incapacity is defined as well as what can cause it, and next week I’ll write about what this concept means in relation to elder law and estate planning.

Incapacitated Definition

When someone is incapacitated, they are unable to make personal decisions or understand legal documents. A person who is incapacitated requires someone to make decisions on their behalf. Individuals such as an agent under a health care power of attorney or a guardian might be the ones to make decisions for a person who is incapacitated.

You may want a guardian to be appointed for your family member or loved one who has been experiencing memory loss and/or whose decision-making process has been impaired. It’s difficult to see this happen to someone you love, and you may be struggling with how to find the best way to help them. A declaration of incompetence is required for a guardian to be appointed, and determining if someone is at the point of being incompetent to make their own decisions is a complicated process.

When someone becomes unable to make decisions for themself, the court may appoint a “guardian” or “conservator” to make decisions for this person. A guardian is only appointed if a power of attorney or another less restrictive alternative is not in place or is not working.

The standard for being deemed in need of a guardian varies between states, and depending on the state, the standards for a complete guardianship vs. a conservatorship only over finances may be different. In general, someone is determined to require guardianship when they show a lack of capacity to make responsible decisions or decisions in their best interests.

Elder law and estate planning serve two different but important purposes. While elder law focuses on preserving your wealth and promoting your well-being during your lifetime, estate planning concentrates on what happens after you have passed away.

Elder law planning helps to ensure that seniors can live as long, healthy, and financially secure lives as possible. It involves planning for future medical needs and long-term care. Elder law attorneys can assist you with creating a plan to pay for future care while maintaining your assets or to qualify for Medicaid or other benefits to pay for long-term care. Elder law planning also serves to protect you from elder abuse or exploitation when you get older or become incapacitated. In addition, elder law covers assistance with guardianship and conservatorship.

Unlike elder law which focuses on older individuals, estate planning is for people of every age. Estate planning attorneys help you plan for what will happen to your assets after you die. They use documents such as wills and trusts to ensure your wishes are carried out properly. Estate planning also includes naming a guardian for your children or making plans for the caretaking of your pets. Estate planners can also help you avoid probate and save on estate taxes.

During the COVID-19 pandemic, many of us in Illinois are complying with the governor’s stay-at-home order. We are hunkered down in our homes – making only necessary trips for essential matters such as medical treatment, supplies, or perhaps taking a walk to breathe in in some fresh air and soak in some sunshine while maintaining social distancing. We thank and applaud everyone who is doing their part in curbing the spread of this virus.

At this time, some of you may reflect on the “what ifs” of the future. What will happen if you become incapacitated, or worse, if you pass? What if your child has special needs and you wish to preserve assets for the benefit of your child? What if you have minor children? How or who will take care of them and assets for their benefit should you be unable to care for them, or worse, die? Are you able to make or coordinate health care and financial decisions for your spouse, parent or other elder loved one?

Illinois law provides defaults for distributions through probate court proceedings if you were to pass away and a legal process (namely, guardianship) should you become incapacitated. Depending on Illinois law could involve what could be costly court proceedings. Ultimately, the result of the Illinois laws may not reflect your wishes as to the disposition of your assets and/or who will be in charge. A properly executed estate plan sets out your wishes and names the trusted persons you want in charge of your affairs during life and afterward. Estate plan documents can and often include wills, powers of attorney, living wills, and trust documents – such as living trusts, special needs trusts, or asset protection trusts.

The Center for Disease Control and Prevention (“CDC”) and the Illinois Department of Health (“IDPH”) have set guidelines for healthcare facilities, including nursing homes, and other long-term care facilities amidst the current COVID-19 pandemic we are experiencing. These guidelines include visitor restrictions for the facilities. In a nutshell, if you are not considered an essential healthcare employee or a compassionate care visitor for end of life situations, you are not going to get near one of these facilities until…well we are not sure.

These guidelines have been put in place for the safety of the residents and employees, and understandably so. On the other hand, this guidance is missing clarity. The states (including Illinois) and, in-turn, the facilities are left to interpret what the definition of an essential healthcare employee and a compassionate care visitor means. Is a third-party caregiver an essential healthcare employee? Is being placed in hospice, in and of itself, considered an end of life situation? Based on experience over the past few weeks, the answer is no. It should be noted, though, that there is no real legal authority stating such. We are facing a time where loved ones could pass away alone because a facility did not interpret the guidelines to allow a visitor in such a situation. Seeking the courts guidance on the matter may be necessary. Until then, the facilities are given the freedom and flexibility to interpret the guidelines as they see fit.

What can you do until then? Often times, loved ones of the residents of nursing homes and long-term care facilities provide care, love, and encouragement to them. During this time, more than ever, this encouragement and love is essential to the resident’s well-being. If you have a loved one in a facility, what can you do during this critical time? Technology has allowed us to connect with people in ways we never could before. Calling and video chatting with loved ones can provide them with the emotional support they need. Just the sound of a loved one’s voice can bring a smile to a resident’s face.  Online games can be played together as well. While we are getting back to the basics during this time, writing a good old fashioned letter is a great option as well.

For years, attorneys, accountants, financial planners, and insurance sale persons have been touting the benefits of long-term care insurance. “Buy in your 50s and you will never have to worry about your future long-term care expenses ever again” was the common refrain. It was sound advice. With the right long-term care policy your problems were solved. Daily benefit rates typically covered the lion’s share of the daily private pay rate preserving assets for much-needed extras and, in many cases, a tidy inheritance for the next generation.

Unfortunately, any aging population, the unexpected popularity of assisted living facilities, and a steady increases in the cost of care has made it all but impossible for insurance companies to continue to provide the promised levels of benefits without increasing premiums. It can be argued that insurance companies should have seen the baby-boomers coming but no one anticipated that so many seniors would prefer to transition to an assisted living facility foregoing the in-home care option. Insurance companies also expected a much higher percentage of customers to cancel coverage. A common theme across all types of elective insurance coverage types. The constant refrain from professional advisers to clients recommending that they retain long-term care insurance at all costs had the unintended effect of making LTC insurance untenable for insurers.

All of these unanticipated and unintended consequences has had a real impact on seniors. In some cases, premiums have as much as doubled in the past two years and Mass Mutual, one of the largest LTC insurance underwriters, is about to ask regulators to authorize an average increase in premiums of 77 percent.

Recently, a lawsuit was filed against the Illinois Department of Human and Family Services over delays in the processing of claims for Medicaid benefits. Although the lawsuit focuses primarily on applications for community Medicaid and health insurance benefits, delays by IDHFS in processing Medicaid claims for long-term care benefits can have a dramatic effect on those seniors requiring assistance to pay for long-term nursing home care.

A quick synopsis of the Medicaid system as it applies to nursing home benefits:

Medicaid (not to be confused with Medicare) is a government program funded by both state and federal resources to help seniors and disabled individuals with limited resources pay for long-term care. Although Medicare will cover short-term stays in a nursing home for rehabilitation and some respite care, Medicare provides no benefit to those seniors that need to move to a nursing home on a permanent basis.

Open enrollment for Medicare runs from October 15th to December 7th this year. If you are eligible for Medicare, you are more likely than ever to be the target of Medicare related scams this year. Medicare scammers are smart and they know exactly what types of scenarios, incentives and stories are most likely to ensnare seniors.

Typical scam calls may be about a refund of premiums, the need for a new Medicare card, false offers of free medical services and bogus Medigap plans. No matter the story used, service offered, or purported identity of the caller, the objective is for the scammer to obtain the senior’s Social Security number by slowly extracting as much personal information as possible from their victim.

Here are some important things for seniors to remember about Medicare to help weed out fake callers:

At our office we are frequently approached by elderly clients who are considering a second marriage later in life. A new romantic relationship can mean new friends, new experiences, increased happiness and an overall better quality of life. That being said, older couples do have some important issues to consider when deciding whether or not to take the plunge. Adult children, retirement plans, long-term care consideration and government benefits are all topics that should be discussed thoroughly before an elderly couple decides to marry.

A particularly sensitive issue is what happens to the family home. Whether the couple decides to remarry, or decides that they would prefer to just live together, it is important to plan for what will happen to the home they decide to cohabit. Seniors in this situation are faced with the competing goals of wanting to keep the equity of the home in their family, while wanting to provide a place for their significant other to live should the owner predecease. Through the use of proper estate planning such as a life estate or properly drafted land trust, this can be achieved. Care should be taken to ensure that assets are available to maintain the home and that the owner’s family understands their wishes.

Another sticky topic, is how to pay for long-term care and what happens if one spouse requires Medicaid benefits. Long-term care can be very expensive and the Illinois Department of Human Services will require that a spouse’s assets be taken into consideration even in the face of trust and prenuptial agreements when reviewing an application for Medicaid benefits. One spouse’s refusal to make their assets available for the care of another can have a significant negative impact on Medicaid eligibility. We strongly advise against later in life marriages when the need for Medicaid benefits to pay for long-term care is relatively foreseeable.

No area of our practice causes more confusion and angst for seniors and their families as the question of how to pay for nursing home care. Within that practice area, no topic causes more problems for seniors as asset protection planning. Myths abound about how to protect assets prior to applying for Medicaid. Some of the most common are: 1) that a Medicaid applicant can transfer $14,000 per child per year; 2) that the kids can be added to financial accounts to shield assets; or 3) that investing in annuities will solve all their problems. In fact all of these theories about asset protection are wrong. Worst of all, engaging in these activities can leave the senior in an incredibly precarious position.

The $14,000 per child myth is based on IRS gifting rules which have no relationship to Medicaid eligibility or planning; adding your children to your account will have no effect on how Medicaid counts the assets when determining your eligibility for benefits; and the rules concerning Medicaid and annuities has changed dramatically over the years to that point that only one, very specific type of annuity will help a Medicaid applicant qualify for benefits while preserving assets.

Even playing by all the rules can created problems. For example, current Medicaid rules will not take into account any transaction that occurred more than five years before the application for benefits. This leads many seniors to transfer their assets to children well in advance of applying for Medicaid benefits.  Unfortunately this creates a whole new set of problems. Assets transferred to children are now vulnerable to the creditors and spouses of the kids. There can also be serious capital gains and real estate tax implications for transferring property to children that must be taken into account.