Legal Issues for People with Alzheimer’s Disease
Planning for the future is as important as fully living in and enjoying the present. This is especially true as we grow older. Anticipating the legal needs of people with Alzheimer’s disease, and planning and taking steps to prepare for their future can have important benefits for them and their families.
For the most part, the legal goals of a person with Alzheimer’s are the same as for any person:
- We all want to live a dignified and meaningful life, and make choices that will benefit our families.
- We all need to be prepared for situations where we are unable to manage our affairs.
- We all want to protect our life savings and to leave whatever we can to our loved ones after we die.
- However, what are possible problems for all of us – incapacity and catastrophic medical costs – are probabilities or certainties for people with Alzheimer’s disease. This makes addressing their legal issues critical for them and their famlies.
The first part of this article will address issues in two areas. First we will examine how to prepare for the likely progressive incapacity of Alzheimer’s disease. As their disease progresses, people with Alzheimer’s will require more and more assistance with various activities and responsibilities. They will become more vulnerable to fraud and abuse. They will become unable to make legal, financial and health care decisions. The first part of this chapter discusses what we can do now to minimize these risks. It will discuss the availble tools that can help them and their families live safely and with dignity.
The second part of this article will address estate planning for people witrh Alzheimer’s disease. We will discuss wills, trusts and transfer of assets. We will consider the catastrophic health care costs associated with Alzheimer’s disease and mention some strategies for preserving assets and savings for our families.
It cannot be stressed too much that the discussion here is general and educational in nature, and is not a substitute for consultation with a lawyer who specializes in trusts and estates law, and/or a lawyer who does Medicaid planning. You must hire a lawyer who practices law in these areas in your state to help you with the strategies discussed below.
I. Planning for Incapacity
People with Alzheimer’s disease have an important resource. This is the network of friends and family members who will help and support them as the disease progresses. But a willingness to help is not enough. Family and friends must have the legal tools available to be able to help in critical areas. If you believe that you or a family member may have Alzheimer’s disease, you should immediately see an attorney to put in place the legal documents so that someone can help with legal, medical and financial issues when you no longer can.
A. Power of Attorneys.
Every person with Alzheimer’s disease should have a power of attorney (POA). A power of attorney is a document which appoints another person or persons to act as your agent, your “attorney-in-fact.” An attorney-in-fact is not just your agent, but your fiduciary. The Latin root of the word fiduciary is “fides” which means “trust” or “faith.” A fiduciary is a person who has the responsibility to act in a way which is both disinterested and competent. Acting in a way which is reckless, even though it is well intentioned, is a violation of the fiduciary responsibility of an attorney-in-fact.
There are different kinds of powers of attorney. A power of attorney can be general or limited. In a general power of attorney, the “principal” (the person who is designating an agent), gives broad authority to the agent to act in her behalf. The agent or attorney-in-fact can essentially perform all legal actions that the principal could do. Since it is not always possible to predict all of the problems that may arise, it is generally advisable to have a general power of attorney runnng to a trustworthy and competent family member or friend.
There are other options available. A limited power of attorney is just that – limited to power to act in one or more certain capacities. For example, a power of attorney may designate an agent for banking purposes. Although such an agent could write checks, transfer funds and otherwise act on behalf of the principal for banking purposes, he would have no authority in other areas. He could not, for example, transfer real property, sell stock or make health care decisions.
A power of attorney can designate one attorney-in-fact or it may designate two. If it names two agents, the instrument can permit the two agents to act separately or it can require them to act together. The choices you make in this regard are personal and should address your situation.
A power of attorney can be durable or non-durable. A durable power of attorney means it continues to be valid after the principal becomes incompetent. A non-durable power of attorney is extinguished by the incapacity of the principal. Generally, only a durable power of attorney should be executed; the instrument should clearly state that the authority given survives and continues upon the incapacity of the principal.
A power of attorney should be executed under the supervision of lawyer who will interview the principal and be in a position to verify that the principal was competent to execute it. The princiapl must understand that he/she is appointing an agent, and what it means to do so. You can execute a power of attorney (or any other document) even if you physically disabled and cannot write your name.
B. Living Will and Health Care Proxies.
While a power of attorney is generally sufficient to authorize your attorney in fact to make many health related decisions, there are some situations where additional advance planning is advisable. One very sensitive area of incapacity is the inability to make decisions about medical care. The more important and dramatic issues involve situations where an individual has lost awareness or conscious brain activity and is not expected to recover that awareness or consciousness.. The only way to keep the individual living is with sophisticated medical technology that may provide food and hydration, may breathe for the person, or other technologies to keep the physical body alive.
For example, a person with Alzheimer’s disease who had reached the end state of the disease was unable to walk, bathe or dress himself. He no longer communicated verbally. Finally, he lost the ability to swallow. His doctor wanted to insert a feeding tube. He had given his son a health care proxy, but they had never discussed the possibility of him needing machines to keep him alive. The son was left deeply confused about what he should do. On the one hand he felt his father would not have wanted to be kept alive this way, but he was not sure. It was a terrible decision which confronted him.
There are different religious, philosophical views and personal beliefs of what is the right and wrong in such situations. Some people want their body kept alive as long as possible. Others feel that once they can no longer be aware of ones they love, or to have any awareness of the world, they would not want their lives prolonged by invasive medical technologies.
Individuals can plan for these situations by providing an advance directive to their family members, doctors, and others responsible for their care by means of a living will and a health care proxy. A living will is a document in which states what you wish to have happen to you in a situation where you are no longer able to communicate. It is possible in a living will to describe those situations in which you do wish various medical technologies to be used and in which situations you don’t want them employed. A health care proxy appoints an agent to carry out the wishes expressed in the living will. Usually a living will and a health care proxy are combined in one document, which may be called by either name or a combination of the two.
Family members may be faced with a spouse or parent who is comatose. Doctors may announce that a stroke or heart attack has starved the brain of oxygen, resulting in massive brain damage. After a period of days, weeks or months the consensus of the medical opinion may be that a loved one will never again regain consciousness or brain function. And the doctors will ask the family members what they should do. This is a terrible and terrifying situation. If you are unprepared, you may have to make a decision at a time when you are vulnerable and confused.
The goal of a living will and health care proxy is remove the responsibility for this decision from the family members by clearly stating what the incapacitated person would want to happen. It also appoints a specific person to make that decision and carry out the patient’s wishes.
In addition to the making of a living will and health care proxy, it is very important to discuss your wishes with all of your close family members. Tell them what you want to happen if something happens to you so that the family can be as united as possible to support your decision and your agent who has to carry it out.
II. Estate Planning
A. You Need a Will.
Everyone should make a last will and testament. A will is an instrument by which you state what should happen to your property after you die. It may also contain burial instructions, make provision for the care of minor children, forgive debts, or make charitable contributions.
A will can make specific gifts to specified individuals; i.e., you can leave your car to your nephew and your share in a hunting lodge to your friend. You can give the right to live in your home to your sister who lives there for that sister’s life and then have the property go your children. Any gift you can imagine can probably be made under a will. You should have a lawyer who specializes in trusts and estates prepare and supervise the execution of a will.
A trust is a container, like a box, that you put things in. The person who sets up the trust, who puts things in the box, is the grantor. The person who manages the contents of the box, the trust assets, is called the trustee. The trust document is a set of rules as to how the contents of the box are to be managed, rules as to when things come out of the box and rules about who is to receive the things (often, but not always, money) that come out of the box. A trust can be an essential part of estate planning, particularly for a person who becomes incapacitated. A trust should always be prepared by a lawyer who specializes in trust preparation.
There are many kinds of trusts, but two kinds will be discussed here: revocable trusts and irrevocable trusts. Revocable trusts are created primarily as a substitute for a will; they also may have provisions for someone else to manage your assets if you become incapacitated. Irrevocable trusts are designed to protect your assets for the benefit of your heirs so that you may become eligible for Medicaid in the event that you require custodial nursing home care.
A revocable trust means that the grantor can take back the money she puts in the trust. The grantor always has access to all of the trust assets and can take some or all of them out at any time. The trust can name someone besides the grantor to manage the trust assets, called the trustee, and will usually name a successor trustee in case the first trustee cannot or will not do the job. The trust will also provide for who gets the trust assets upon the occurrence of a specific event, usually the death of the grantor, in the same ways as a will leaves assets to beneficiaries. For this reason a revocable trust is called a will substitute. The grantor can usually change the beneficiaries of a will any time he wishes and can also change the trustee at will.
A revocable trust is a very useful tool to plan for the future incapacity of the grantor. It is flexible and can be adapted to individual situations. The one thing it cannot do is to protect a grantor’s assets from catastrophic health and nursing home costs. One way of protecting your assets from these costs is the use of an irrevocable trust. This kind of trust has special rules. The most important rule is that once the grantor puts an asset into this container, she can never get the asset back. Ever. Usually, the grantor will receive the income generated by the asset, but he will never be able to touch the principal. If an asset such as the grantor’s house is placed in the trust, the grantor will be able to live in the house. The trust may sell a house and purchase another house for the grantor. But the house or the money from the sale of the house can never come out of the trust to be used for some other purpose. The importance of this feature will become clearer in the next section on Medicaid Planning.
C. Catastrophic Health Care Costs and Medicaid Planning
The cost of health care is unevenly distributed. Some of us almost never see a doctor and die at home in our beds. Others have high medical bills and may spend part of our life needing nursing home care. It is generally not possible to predict what will happen to us. But in the event that we develop Alzheimer’s disease, it becomes exceedingly likely that we will incur high health care costs, and, at some point, will require very expensive specialized nursing home care.
There are many ways to plan for this situation. First, you should carefully review your health insurance coverage, including Medicare to understand what it does and doesn’t cover. If you are eligible for Medicare you may want additional health insurance that pays the costs that Medicare does not pay.
Medicare and most ordinary health insurance policies do not pay for one very important cost. They do not pay the cost of custodial nursing home care. The term “custodial” is key here, because both Medicare and most health insurance do pay the cost of therapeutic or rehabilitative nursing home care. This means that nursing home care while you are recovering from a fall or recovering from a hip replacement is covered while you receive therapy and prepare to return home. But once you no longer benefit from therapy and you are unable to return home because you will indefinitely need help with daily living, you require custodial nursing home care. This kind of care is not covered by Medicare or most insurance policies. Most people with Alzheimer’s disease will eventually need this kind of care. It can be very expensive.
A nursing home may cost between $70,000.00 to $80,000.00 annually, or even more. If you can afford to write a check for this amount you are fortunate. Most of us cannot afford these costs for very long without exhausting our life savings. When our savings run out, or if we have no savings, then custodial nursing home care is paid for by the taxpayers under the Medicaid program. This becomes an especially critical issue where the spouse remains living in the community. Medicaid rules require that jointly owned assets be spent down to a certain level prior to the institutionalized spouse being eligible for Medicaid. These levels vary from state to state and from year to year, but in 2004, in New York, for example, the community spouse is entitled to keep the family home and car, and cash assets in the amount of about $80,000.00. The balance of any joint assets must be spent prior to Medicaid eligibility for the spouse who requires custodial nursing home care.
One way of paying for nursing home costs is to purchase long term care that pays for nursing home care when you need it. There are two problems with long term care insurance. First, premiums may not be affordable, particularly as you get older. Second, it may not be available to someone has already been diagnosed with Alzheimer’s disease. You should definitely consult with an insurance agent to see if long term care insurance is available and affordable.
If long term care insurance is not an option, and you do not wish to spend down all of your resources before becoming eligible for Medicaid, you may wish to transfer some or all of your assets, into an irrevocable trust or directly to family members. You must then wait for a period of time called the penalty period, which may be as long as three years (if the transfer is directly to an individual) or as long as five years (if the transfer is directed to a trusts) before you are eligible for Medicaid. The length of the penalty period is determined by the value of the assets transferred. Accordingly, you must consider the timing of any transfer and how soon the person with Alzheimer’s disease is likely to require custodial care.
Again, working with a lawyer who specializes in Medicaid planning in your state is essential. Remember that it is also important to make a plan as soon as possible, since any plan which involves asset transfers will have a waiting period prior to being effective.