Rainey Attorneys Law

When one family member becomes a caregiver for another, it’s important to put in writing the terms of the arrangement, according to elder law attorneys interviewed by The Cincinnati Enquirer.

AARP estimates that more than 20 million Americans currently care for ill parents, other relatives or friends. Problems can arise if the caregiving arrangement is not clear to all involved. For example, a caregiver may be providing care without compensation, counting on an inheritance that never materializes.

A formal caregiver contract can outline the responsibilities of a caregiver, and specify the payment he will receive for services rendered and expenses, the article states. A contract ensures that the cost of care is paid at the time it is received and is not left for family members to wrangle over as part of a later division of assets.

Such a contract can also help the person receiving the care transfer assets as a way of qualifying for Medicaid. Payments for contracted services are not viewed as gifts to the care-giving relative, but reimbursement checks without a contract to support them may be.

But the article stresses that such contracts should be drafted by an attorney who specializes in elder law and who can customize the contract terms to the client’s situation. The article quotes ElderLawAnswers member Gregory S. French, a Cincinnati elder law attorney, who says: “My experience has been that assisting communication among family members — getting them on the same page — is one of the most important things an attorney can do to help a family plan for this sort of situation.”

The article suggests that a good caregiver contract also should:

• Delineate the rights and obligations of both care-receiver and caregiver.
• Be written as soon as possible, when the care-receiver is unquestionably of sound mind.
• Specify what services are to be provided and at what cost. If the care-receiver is in the caregiver’s home, expenses might well include a share of those utilities, laundry, food and housing costs.
• Fix the caregiver’s compensation at a reasonable rate, comparable to what an outside party would receive for the same services, and specify reimbursement for the caregiver’s out-of-pocket expenses.

As the second round of stimulus checks go out, it is important to know that nursing home residents are not required to turn their checks over to their nursing home. And Medicaid recipients need to spend the cash within a year if it puts them over Medicaid’s resource limit.

In December 2020, Congress approved $600 stimulus checks for individuals making less than $75,000 a year. Those checks should be sent to everyone eligible, including individuals on Medicaid and in a nursing home or assisted living facility.

The Federal Trade Commission (FTC) is reminding nursing home and assisted living residents that their stimulus checks are for them, not their facility. With the first round of stimulus checks, there were reports that facilities were taking the checks without residents’ permission. The FTC says that if nursing homes ask for a resident’s check, the resident should contact the state attorney general and the FTC.

Medicaid recipients who receive a stimulus check that puts them above Medicaid’s resource limit will need to spend down the money within a year or risk losing benefits. The Social Security Administration has said that it will not consider stimulus payments as income, and that the payments will be excluded from a Medicaid recipient’s resources for 12 months. The following are examples of what a Medicaid recipient may be able to spend the money on without affecting their eligibility:

• Make a payment toward paying off debt.
• Make small repairs around the house.
• Update personal effects. Buy household goods or personal comfort objects. Buy a new wardrobe, electronics, or furniture.
• Buy needed medical equipment, see a dentist or get your eyes checked if those items aren’t covered by insurance.

If you have questions about how you or a family member in a nursing home can spend the money, contact your elder law attorney.

In some circumstances, immediate annuities can be ideal Medicaid planning tools for spouses of nursing home residents. Careful planning is needed to make sure an annuity will work for you or your spouse.

An immediate annuity, in its simplest form, is a contract with an insurance company under which the consumer pays a certain amount of money to the company and the company sends the consumer a monthly check for the rest of his or her life.

In most states the purchase of an annuity is not considered to be a transfer for purposes of eligibility for Medicaid, but is instead the purchase of an investment. It transforms otherwise countable assets into a non-countable income stream. As long as the income is in the name of the community spouse, it’s not a problem.

In order for the annuity purchase not to be considered a transfer, it must meet the following basic requirements:

• It must be irrevocable–you cannot have the right to take the funds out of the annuity except through the monthly payments.
• You must receive back at least what you paid into the annuity during your actuarial life expectancy. For instance, if you have an actuarial life expectancy of 10 years, and you pay $60,000 for an annuity, you must receive annuity payments of at least $500 a month ($500 x 12 x 10 = $60,000).
• If you purchase an annuity with a term certain (see below), it must be shorter than your actuarial life expectancy.
• The state must be named the remainder beneficiary up to the amount of Medicaid paid on the annuitant’s behalf.

Example: Mrs. Jones, the community spouse, lives in a state where the most money she can keep for herself and still have Mr. Jones, who is in a nursing home, qualify for Medicaid (her maximum resource allowance) is $128,640 (in 2020). However, Mrs. Jones has $238,640 in countable assets. She can take the difference of $110,000 and purchase an annuity, making her husband in the nursing home immediately eligible for Medicaid. She would continue to receive the annuity check each month for the rest of her life.

In most instances, the purchase of an annuity should wait until the unhealthy spouse moves to a nursing home. In addition, if the annuity has a term certain — a guaranteed number of payments no matter the lifespan of the annuitant — the term must be shorter than the life expectancy of the healthy spouse. Further, if the community spouse does die with guaranteed payments remaining on the annuity, they must be payable to the state for reimbursement up to the amount of the Medicaid paid for either spouse.

All annuities must be disclosed by an applicant for Medicaid regardless of whether the annuity is irrevocable or treated as a countable asset. If an individual, spouse, or representative refuses to disclose sufficient information related to any annuity, the state must either deny or terminate coverage for long-term care services or else deny or terminate Medicaid eligibility.

Annuities are of less benefit for a single individual in a nursing home because he or she would have to pay the monthly income from the annuity to the nursing home. However, in some states immediate annuities may have a place for single individuals who are considering transferring assets. Income from an annuity can be used to help pay for long-term care during the Medicaid penalty period that results from the transfer. In such cases, the annuity is usually short-term, just long enough to cover the penalty period.

In short, immediate annuities are a very powerful tool in the right circumstances. They must also be distinguished from deferred annuities, which have no Medicaid planning purpose. The use of immediate annuities as a Medicaid planning tool is under attack in some states, so be sure to consult with your attorney before pursuing the strategy described above.

For more information or questions, please schedule a consultation with one our licensed attorneys. Consultations are available in office, by phone, or by video.

Every adult is assumed to be capable of making his or her own decisions unless a court determines otherwise. If an adult becomes incapable of making responsible decisions, the court will appoint a substitute decision maker, usually called a “guardian,” but called a “conservator” or another term in some states.

Guardianship is a legal relationship between a competent adult (the “guardian”) and a person who because of incapacity is no longer able to take care of his or her own affairs (the “ward”). The guardian can be authorized to make legal, financial, and health care decisions for the ward. Depending on the terms of the guardianship and state practices, the guardian may or may not have to seek court approval for various decisions. In many states, a person appointed only to handle finances is called a “conservator.”

Some incapacitated individuals can make responsible decisions in some areas of their lives but not others. In such cases, the court may give the guardian decision making power over only those areas in which the incapacitated person is unable to make responsible decisions (a so-called “limited guardianship”). In other words, the guardian may exercise only those rights that have been removed from the ward and delegated to the guardian.

Incapacity

The standard under which a person is deemed to require a guardian differs from state to state. In some states the standards are different, depending on whether a complete guardianship or a conservatorship over finances only is being sought. Generally, a person is judged to be in need of guardianship when he or she shows a lack of capacity to make responsible decisions. A person cannot be declared incompetent simply because he or she makes irresponsible or foolish decisions, but only if the person is shown to lack the capacity to make sound decisions. For example, a person may not be declared incompetent simply because he spends money in ways that seem odd to someone else. Also, a developmental disability or mental illness is not, by itself, enough to declare a person incompetent.

Process

In most states, anyone interested in the proposed ward’s well-being can request a guardianship. An attorney is usually retained to file a petition for a hearing in the probate court in the proposed ward’s county of residence. Protections for the proposed ward vary greatly from state to state, with some simply requiring that notice of the proceeding be provided and others requiring the proposed ward’s presence at the hearing. The proposed ward is usually entitled to legal representation at the hearing, and the court will appoint an attorney if the allegedly incapacitated person cannot afford a lawyer.

At the hearing, the court attempts to determine if the proposed ward is incapacitated and, if so, to what extent the individual requires assistance. If the court determines that the proposed ward is indeed incapacitated, the court then decides if the person seeking the role of guardian will be a responsible guardian.

A guardian can be any competent adult — the ward’s spouse, another family member, a friend, a neighbor, or a professional guardian (an unrelated person who has received special training). A competent individual may nominate a proposed guardian through a durable power of attorney in case she ever needs a guardian.

The guardian need not be a person at all — it can be a non-profit agency or a public or private corporation. If a person is found to be incapacitated and a suitable guardian cannot be found, courts in many states can appoint a public guardian, a publicly financed agency that serves this purpose. In naming someone to serve as a guardian, courts give first consideration to those who play a significant role in the ward’s life — people who are both aware of and sensitive to the ward’s needs and preferences. If two individuals wish to share guardianship duties, courts can name co-guardians.

Reporting Requirements

Courts often give guardians broad authority to manage the ward’s affairs. In addition to lacking the power to decide how money is spent or managed, where to live and what medical care he or she should receive, wards also may not have the right to vote, marry or divorce, or carry a driver’s license. Guardians are expected to act in the best interests of the ward, but given the guardian’s often broad authority, there is the potential for abuse. For this reason, courts hold guardians accountable for their actions to ensure that they don’t take advantage of or neglect the ward.

The guardian of the property inventories the ward’s property, invests the ward’s funds so that they can be used for the ward’s support, and files regular, detailed reports with the court. A guardian of the property also must obtain court approval for certain financial transactions. Guardians must file an annual account of how they have handled the ward’s finances. In some states guardians must also give an annual report on the ward’s status. Guardians must offer proof that they made adequate residential arrangements for the ward, that they provided sufficient health care and treatment services, and that they made available educational and training programs, as needed. Guardians who cannot prove that they have adequately cared for the ward may be removed and replaced by another guardian.

Alternatives to Guardianship

Because guardianship involves a profound loss of freedom and dignity, state laws require that guardianship be imposed only when less restrictive alternatives have been tried and proven to be ineffective. Less restrictive alternatives that should be considered before pursuing guardianship include:

• Power of Attorney. A power of attorney is the grant of legal rights and powers by a person (the principal) to another (the agent or attorney-in-fact). The attorney-in-fact, in effect, stands in the shoes of the principal and acts for him or her on financial, business or other matters. In most cases, even when the power of attorney is immediately effective, the principal does not intend for it to be used unless and until he or she becomes incapacitated.
• Representative or Protective Payee. This is a person appointed to manage Social Security, Veterans’ Administration, Railroad Retirement, welfare or other state or federal benefits or entitlement program payments on behalf of an individual.
• Conservatorship. In some states this proceeding can be voluntary, where the person needing assistance with finances petitions the probate court to appoint a specific person (the conservator) to manage his or her financial affairs. The court must determine that the conservatee is unable to manage his or her own financial affairs, but nevertheless has the capacity to make the decision to have a conservator appointed to handle his or her affairs.
• Revocable trust.A revocable or “living” trust can be set up to hold an older person’s assets, with a relative, friend or financial institution serving as trustee. Alternatively, the older person can be a co-trustee of the trust with another individual who will take over the duties of trustee should the older person become incapacitated.

Federal law requires the state to attempt to recover the long-term care benefits from a Medicaid recipient’s estate after the recipient’s death. If steps aren’t taken to protect the Medicaid recipient’s house, it may need to be sold to settle the claim.

For Medicaid recipients age 55 or older, states must seek recovery of payments from the individual’s estate for nursing facility services, home and community-based services, and related hospital and prescription drug services. States also have the option of recovering all Medicaid benefits from individuals over age 55, including costs for any medical care, not just long-term care benefits.

There are a few exceptions. The state cannot recover from the estate of a Medicaid recipient who has a surviving spouse until after the spouse passes away. After the spouse dies, the state may file a claim against the spouse’s estate to recover money spent for the Medicaid recipient’s care. The state also cannot recover from the estate if the Medicaid recipient had a child who is under age 21 or a child who is blind or disabled.

While states must attempt to recover funds from the Medicaid recipient’s probate estate, meaning property that is held in the beneficiary’s name only, they have the option of seeking recovery against property in which the recipient had an interest but which passes outside of probate (this is called “expanded” estate recovery). This includes jointly held assets, assets in a living trust, or life estates. Given the rules for Medicaid eligibility, the only probate property of substantial value that a Medicaid recipient is likely to own at death is his or her home. However, states that have not opted to broaden their estate recovery to include non-probate assets may not make a claim against the Medicaid recipient’s home if it is not in his or her probate estate.

In addition to the right to recover from the estate of the Medicaid beneficiary, state Medicaid agencies may place a lien on real estate owned by a Medicaid beneficiary during his or her life unless certain dependent relatives are living in the property. The state cannot impose a lien if a spouse, a disabled or blind child, a child under age 21, or a sibling with an equity interest in the house is living there.

Once a lien is placed on the property, if the property is sold while the Medicaid beneficiary is living, not only will the beneficiary cease to be eligible for Medicaid due to the cash from the sale, but the beneficiary would have to satisfy the lien by paying back the state for its coverage of care to date. In some states, the lien may be removed upon the beneficiary’s death. In other states, the state can collect on the lien after the Medicaid recipient dies. Check with your attorney to see how your local agency handles this.

There are some circumstances under which the value of a house can be protected from Medicaid recovery. The state cannot recover if the house is in the spouse’s name and the Medicaid recipient relinquished his or her interest. If the house is in an irrevocable trust, the state cannot recover from it.

In addition, some children or relatives may be able to protect a nursing home resident’s house if they qualify for an undue hardship waiver. For example, if a Medicaid recipient’s daughter took care of him before he entered the nursing home and she has no other permanent residence, she may be able to avoid a claim against his house after he dies. Consult with your attorney to find out if the undue hardship waiver may be applicable.

Your will is a legally-binding statement directing who will receive your property at your death. It also appoints a legal representative to carry out your wishes. However, the will covers only probate property. (Probate is the court process by which a deceased person’s property is passed to his or her heirs and people named in the will.) Many types of property or forms of ownership pass outside of probate. Jointly-owned property, property in trust, life insurance proceeds and property with a named beneficiary, such as IRAs or 401(k) plans, all pass outside of probate

Why should you have a will? Here are some reasons:

1. With a will you can direct where and to whom your estate (what you own) will go after your death. If you died intestate (without a will), your estate would be distributed according to your state’s law. Such distribution may or may not accord with your wishes. Many people try to avoid probate and the need for a will by holding all of their property jointly with their children. This can work, but often people spend unnecessary effort trying to make sure all the joint accounts remain equally distributed among their children. These efforts can be defeated by a long-term illness of the parent or the death of a child. A will can be a much simpler means of carrying out one’s wishes about how assets should be distributed.
2. Wills make the administration of your estate run smoothly. Often the probate process can be completed more quickly and at less expense to your estate if there is a will. With a clear expression of your wishes, there are unlikely to be any costly, time-consuming disputes over who gets what.
3. Your will is the only way to choose the person to administer your estate and distribute it according to your instructions. This person is called your “executor” (or “executrix” if you appoint a woman) or “personal representative,” depending on your state’s statute. If you do not have a will naming him or her, the court will make the choice for you. Usually the court appoints the first person to ask for the post, whoever that may be.
4. For larger estates, a well-planned will can help reduce estate taxes.
5. A will allows you to appoint who will take your place as guardian of your minor children should both you and their other parent both pass away.

Filling out a worksheet will help you make decisions about what to put in your will. Bring it and any additional notes to your lawyer and he or she will be able to efficiently prepare a will that meets your needs and desires.

Being appointed guardian of a loved one is a serious responsibility. As guardian, you are in charge of your loved one’s well-being and you have a duty to act in his or her best interest.

If an adult becomes mentally incapacitated and is incapable of making responsible decisions, the court will appoint a substitute decision maker, often called a “guardian,” but in some states called a “conservator” or other term. Guardianship is a legal relationship between a competent adult (the “guardian”) and a person who because of incapacity is no longer able to take care of his or her own affairs (the “ward”).

If you have been appointed guardian, the following are things you need to know:

• Read the court order. The court appoints the guardian and sets up your powers and duties. You can be authorized to make legal, financial, and health care decisions for the ward. Depending on the terms of the guardianship and state practices, you may or may not have to seek court approval for various decisions. If you aren’t sure what you are allowed to do, consult with a lawyer in your state.
• Fiduciary duty. You have what’s called a “fiduciary duty” to your ward, which is an extremely high standard. You are legally required to act in the best interest of your ward at all times and manage your ward’s money and property carefully. With that in mind, it is imperative that you keep your finances separate from your ward’s finances. In addition, you should never use the ward’s money to give (or lend) money to someone else or for someone else’s benefit (or your own benefit) without approval of the court. Finally, as part of your fiduciary duty you must maintain good records of everything you receive or spend. Keep all your receipts and a detailed list of what the ward’s money was spent on.
• File reports on time. The court order should specify what reports you are required to file. The first report is usually an inventory of the ward’s property. You then may have to file yearly accountings with the court detailing what you spent and received on behalf of the ward. Finally, after the ward dies or the guardianship ends, you will need to file a final accounting.
• Consult the ward. As much as possible you should include the ward in your decision-making. Communicate what you are doing and try to determine what your ward would like done.
• Don’t limit social interaction. Guardians should not limit a ward’s interaction with family and friends unless it would cause the ward substantial harm. Some states have laws in place requiring the guardian to allow the ward to communicate with loved ones. Social interaction is usually beneficial to an individual’s well-being and sense of self-worth. If the ward has to move, try to keep the ward near loved ones.

For a detailed guide from the Consumer Financial Protection Bureau on being a guardian, click here.

For more information about guardianship and conservatorship.