Category Archives: Elder Law

Capacity–Can she really make that decision?

Capacity Requirements

Proper execution of a legal instrument requires that the person signing have sufficient mental "capacity" to understand the implications of the document. While most people speak of legal "capacity" or "competence" as a rigid black line–either the person has it or doesn’t–in fact it can be quite variable depending on the person’s abilities and the function for which capacity is required.

One side of the capacity equation involves the client’s abilities, which may change from day to day (or even during the day), depending on the course of the illness, fatigue and the effects of medication. On the other side, greater understanding is required for some legal activities than for others. For instance, you need to have a higher and clearer amount of “capacity” to enter a contract than to write a will. 

Capacity to make a will was summed up by the Massachusetts Supreme Judicial Court:

Testamentary capacity requires ability on the part of the testator to understand and carry in mind, in a general way, the nature and situation of his property and his relations to those persons who would naturally have some claim to his remembrance. It requires freedom from delusion which is the effect of disease or weakness and which might influence the disposition of his property. And it requires ability at the time of execution of the alleged will to understand the nature of the act of making a will.

This is a relatively "low threshold," meaning that signing a will does not require a great deal of capacity. The fact that the next day the testator does not remember the will signing and is not sufficiently "with it" to execute a will then does not invalidate the will if he understood it when he signed it.

The standards for entering into a contract are different because the individual must know not only the nature of her property and the person with whom she is dealing, but also the broader context of the market in which she is agreeing to buy or sell services or property.  This is a more long range kind of understanding, and requires a more complex ability.

While the standards may seem clear, applying them to particular clients may be difficult. The fact that a client does not know the year or the name of the President may mean she does not have capacity to enter into a contract, but not necessarily that she can’t execute a will or durable power of attorney. The determination mixes medical, psychological and legal judgments. It must be made by the attorney (or a judge, in the case of guardianship and conservatorship determinations) based on information gleaned by the attorney in interactions with the client, from other sources such as family members and social workers, and, if necessary, from medical personnel. Doctors and psychiatrists cannot themselves make a determination as to whether an individual has capacity to undertake a legal commitment. But they can provide a professional evaluation of the person that will help an attorney make this decision.

Because you need a third party to assess capacity and because you need to be certain that the formal legal requirements are followed, it can be risky to prepare and execute legal documents on your own without representation by an attorney.

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Putting a residence into Trust

First, a trust is a form of ownership that separates legal title from beneficial ownership.  So something held in trust is “owned” by trustees for the benefit, according to the terms of the trust, of the beneficiaries.  A trustee is a fiduciary, and is required to follow the terms of the trust.  Trusts have been around for centuries, and are used to serve several different purposes.

You might consider putting your home in a trust so that when you pass away it will go directly to the beneficiaries, without going through probate.  You might also put a residence into trust so that you don’t technically own it anymore, but you can still benefit from it in some way (you might be able to continue living there, for example).  Assets held by trusts often provide protection from creditors.  If your son is a beneficiary of a trust, a creditor or divorcing spouse typically could not reach the principal of the trust, as he does not technically “own” the assets.  People also put homes into trusts for Medicaid planning, or for estate tax planning.  These types of trusts need to be irrevocable and carefully drafted. 

Trusts take on-going work and administration once they have been created.  Irrevocable trusts, in particular, require their own tax ID number, and tax returns must be filed annually.

When you put a residence into trust, you take the title of the property from your name, and put it in the name of the trustees.  This is accomplished by drafting and executing a deed which is then recorded in the local registry of deeds. 

Trusts can be confusing or relatively straightforward; they can provide asset protection, a way of planning your legacy, or a way of protecting your family from unexpected events.  They’re an outstanding way of creating structure for a family member who has special needs, or unpredictable spending habits.  If you decide to do trust planning, choose your attorney carefully, and be certain that your advisor has experience working with the type of trust you need.

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Estate Administration

Probate is the process by which a deceased person’s property, known as the "estate," is passed to his or her heirs and legatees (people named in the will). The entire process, supervised by the probate court, usually takes about a year. However, substantial distributions from the estate can be made in the interim.

The emotional trauma brought on by the death of a close family member often is accompanied by bewilderment about the financial and legal steps the survivors must take. The spouse who passed away may have handled all of the couple’s finances. Or perhaps a child must begin taking care of probating an estate about which he or she knows little. And this task may come on top of commitments to family and work that can’t be set aside. Finally, the estate itself may be in disarray or scattered among many accounts, which is not unusual with a generation that saw banks collapse during the Depression.

Here we set out the steps the surviving family members should take. These responsibilities ultimately fall on whoever was appointed executor or personal representative in the deceased family member’s will. Matters can be a bit more complicated in the absence of a will, because it may not be clear who has the responsibility of carrying out these steps.

First, secure the tangible property. This means anything you can touch, such as silverware, dishes, furniture, or artwork. You will need to determine accurate values of each piece of property, which may require appraisals, and then distribute the property as the deceased directed. If property is passed around to family members before you have the opportunity to take an inventory, this will become a difficult, if not impossible, task. Of course, this does not apply to gifts the deceased may have made during life, which will not be part of his or her estate.

Second, take your time. You do not need to take any other steps immediately. While bills do need to be paid, they can wait a month or two without adverse repercussions. It’s more important that you and your family have time to grieve. Financial matters can wait. (One exception: Social Security should be notified within a month of death. If checks are issued following death, you could be in for a battle. For more on Social Security’s death procedures, click on http://www.ssa.gov/pubs/deathbenefits.htm)

When you’re ready, but not a day sooner, meet with an attorney to review the steps necessary to administer the deceased’s estate. Bring as much information as possible about finances, taxes and debts. Don’t worry about putting the papers in order first; the lawyer will have experience in organizing and understanding confusing financial statements.

Below are some of the steps in probate:

1. Filing the will and petition at the probate court in order to be appointed executor or personal representative. In the absence of a will, heirs must petition the court to be appointed "administrator" of the estate.

2. Marshaling, or collecting, the assets. This means that you have to find out everything the deceased owned. You need to file a list, known as an "inventory," with the probate court. It’s generally best to consolidate all the estate funds to the extent possible. Bills and bequests should be paid from a single checking account, either one you establish or one set up by your attorney, so that you can keep track of all expenditures.

3. Paying bills and taxes. If an estate tax return is needed—generally if the estate exceeds $1 million in value—it must be filed within nine months of the date of death. If you miss this deadline and the estate is taxable, severe penalties and interest may apply. If you do not have all the information available in time, you can file for an extension and pay your best estimate of the tax due.

4. Filing tax returns. You must also file a final income tax return for the decedent and, if the estate holds any assets and earns interest or dividends, an income tax return for the estate. If the estate does earn income during the administration process, it will have to obtain its own tax identification number in order to keep track of such earnings.

5. Distributing property to the heirs and legatees. Generally, executors do not pay out all of the estate assets until the period runs out for creditors to make claims, which is a year after the date of death. But once the executor understands the estate and the likely claims, he or she can distribute most of the assets, retaining a reserve for unanticipated claims and the costs of closing out the estate.

6. Filing a final account. The executor must file an account with the probate court listing any income to the estate since the date of death and all expenses and estate distributions. Once the court approves this final account, the executor can distribute whatever is left in the closing reserve, and finish his or her work.

Some of these steps can be eliminated by avoiding probate through joint ownership or trusts. But whoever is left in charge still has to pay all debts, file tax returns, and distribute the property to the rightful heirs. You can make it easier for your heirs by keeping good records of your assets and liabilities. This will shorten the process and reduce the legal bill.

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Durable Powers of Attorney–What?

A durable power of attorney gives another person (agent or attorney in fact)the right to make financial decisions on your behalf.  (It’s “durable” if it still works when you are incapacitated).  A power of attorney is useful if you’re closing a real estate deal when  you’re in China, someone else can sign the paperwork for you.  It’s also a basic estate planning tool that allows your agent to pay your bills and handle your financial matters if you’re incapacitated. 

A power of attorney can be very narrow in time (only effective on the closing date) or broad (starts now and is in effect until I die).  It can also be broad or narrow in its powers.  It is a very powerful tool, so be sure that the person, time period and powers are those you’re comfortable entrusting to your agent.  In general, financial institutions prefer original DPOAs, so when you’re at your attorney’s office, you might execute several originals. 

Much like other estate planning documents, it’s important that you communicate your wishes to your agent, so they will act in a way that you would approve of.  A final note, this document terminates on death, so your agent will not be able to access your safety deposit box if you die with your will there, so DON’T PUT YOUR WILL IN YOUR SAFETY DEPOSIT BOX.

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Free Medicare Preventive Care Has Kicked In

 

One of the benefits of the health reform law took effect January 1, 2011: free preventive services for Medicare recipients. Under the law, people with regular Medicare will no longer have to pay a copay, coinsurance or deductible to receive preventive services that are highly recommended by the U.S. Preventive Services Task Force — services that include screenings for breast cancer, colon cancer, diabetes and heart disease, as well as smoking cessation counseling. Private Medicare plans (also known as Medicare Advantage plans) may still charge for these services, but many do not.

Also under the health reform law, Medicare Part B beneficiaries will now receive an annual wellness visit free of charge. During this yearly visit, your doctor or other health practitioner recognized by Medicare (such as a nurse practitioner) will update your medical history and current prescriptions; measure your height, weight, blood pressure and body mass index; create a screening schedule for the next 5 to 10 years and screen for cognitive issues. And Medicare now pays in full, without patient co-pays or deductibles, for the initial "Welcome to Medicare" that Medicare has offered since 2005 to beneficiaries within 12 months of their becoming covered under Medicare Part B. (For a CommonHealth article on what to expect from a wellness visit and how to get the most out of yours, click here.)

"Preventing diseases that can be prevented, and detecting others at earlier, more treatable stages, are among the keystones for transforming Medicare," said Jonathan Blum, deputy administrator and director of the Center for Medicare at the Centers for Medicare and Medicaid Services.

"By eliminating the beneficiary’s out-of-pocket costs for most preventive services, we are removing a barrier to access and paving the way for improved health for seniors and people with disabilities who rely on Medicare for their health coverage."

For a detailed list from the Medicare Rights Center of preventive services that will no longer require out-of-pocket payments,click here. For more on Medicare’s preventive services from the Medicare Rights Center, click here, and from the Center for Medicare Advocacy, click here.

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What about my pet?

I’ve got a great dog, a turtle who will live for 80 years, and three opinionated cats.  Right now there are several household members who will take care of them should I get in an accident, or have to go into the hospital.  What should someone who lives alone be considering for their pets?  I can’t imagine anything worse than coming from the hospital to find malnourished (or worse) pets.  One tool is a Pet Care card.  Carry it in your wallet to let people know who to call if you wind  up in the hospital .  Also consider posting one on your fridge for first responders in the case of a medical emergency at home.  Send me an e-mail with your mailing address, and I will send you the card that I give my clients.

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A few of my favorite causes – why Planned Giving

Do you have a favorite charity or non-profit? A cause that touches you in a special way?  Each day, charities do great work with scarce resources.  They house our homeless children, feed our poor, provide legal resources to our veterans and to impoverished grandparents, work to preserve our environment, and nurture our faith and spirituality.  My favorite causes include the Fund to Prevent Homelessness, First Parish Church, and the North Shore YMCA.  Each works in my community to improve all of our lives, but each works in a really different way.

Planned Giving is a way to think about YOUR resources, and to include important groups in your giving both while you’re alive, AND after you pass away.  Many families sit down together and draw up a plan, thinking about the causes that are important, and talking about how they want to support them.  This is more about planning than about great wealth – many people with limited means contribute every year to churches and community groups.  Americans are generous, giving more than $307 BILLLION in 2008, mostly from individuals.  One report estimates that 67% of American households make charitable contributions, while only 8% leave gifts in their wills (Fundraising Research).  What organization do YOU love, that maybe gives your life a special sense of hope or comfort?  Consider adding it to your estate plan, by will, by apportioning a percentage of an insurance policy or by making it a beneficiary on an investment account.  And of course, as you do this, talk to your attorney or tax advisor about the best way for your wishes to be drafted and integrated into your overall planning!

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Who gets Mom’s engagement ring?

When doing estate planning, we (lawyers and clients alike) tend to focus on “titled assets” like real estate, bank accounts, retirements accounts, etc.  while in reality, many of our most precious possessions are “untitled assets” or personal property.  This includes jewelry, artwork, collections, furniture, special decorations, and even pets.

In our day to day life, our mother or grandmother’s special tea pot may well hold a spot in our emotional life that no bank account could.  When a loved one passes away, it is these items, precious in our memories and family traditions, but negligible in fungible value, that cause the greatest strife.  When a parent dies leaving behind a cat and a dog, who will take care of them?  When your children remember Christmas at the grandparents’ farm, who will be the steward of the family Christmas tree ornaments?  Which daughter or granddaughter will wear an antique engagement ring?  And who will have the hope chest that has been passed down for three generations? 

These questions exist in families across cultures and socioeconomic strata and as families blend and break, the questions become more complex.   At your next family gathering, take a moment to look around and think about which items carry family memories, and perhaps ask your children or your parents which items are important to them.  This information can be kept in a memorandum with your estate planning documents, and amended as needed.  Make a note of what you’d like to go where, and let your family, friend or neighbor know why.  It can make your gift a part of your legacy in  a way that a list of probate assets never will.

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Health Reform: What Changes Are in Store for the Elderly?

From ElderLawAnswers.com
 

After a year of legislative wrangling and premature forecasts of death, historic legislation overhauling the nation’s health insurance system has passed the Congress and been signed into law by President Obama. The measure that finally prevailed, the Patient Protection and Affordable Care Act, is the same legislation the Senate had approved on Christmas Eve of 2009, although it was amended somewhat by a separate “budget reconciliation” measure that President Obama also signed into law. Because the core health reform measure enacted is the Senate version, much of what we wrote in our earlier article, “The Effects of Health Care Reform on Long-Term Care,” still applies. Just substitute “the newly enacted law” wherever “the Senate bill” appears in the earlier article. The legislation that President Obama signed still contains:

     

  • The nation’s first publicly funded national long-term care insurance program, the Community Living Assistance Services and Supports (CLASS) Act. Its original sponsor, the late Sen. Edward M. Kennedy, did not live to see one of his legislative dreams enacted into law;
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    Help for Medicare Recipients and Early Retirees

    Of perhaps greatest interest to seniors, the law will eventually close the Medicare Part D coverage gap known as the “doughnut hole.” As most seniors know, the Medicare Part D prescription drug program covers medications up to $2,830 a year (in 2010), and then stops until the beneficiary’s out-of-pocket spending reaches $4,550 in the year, when coverage begins again. Many seniors fall into this “doughnut hole” around Labor Day, at which point they have to pay for the medications out of pocket through the end of the year.

    The law starts the process of closing the gap by providing a $250 rebate to Medicare beneficiaries who fall into the doughnut hole in 2010. Then, beginning in 2011 there will be a 50 percent discount on prescription drugs in the gap, and the gap will be closed completely by 2020, with beneficiaries covering only 25 percent of the cost of drugs up until they have spend so much on prescriptions that Medicare’s catastrophic coverage kicks in, at which point copayments drop to 5 percent.

    In addition, starting January 1, 2011, Medicare will provide free preventive care: no co-payments and no deductibles for preventive services such as glaucoma screening and diabetes self-management. Also, the legislation increases reimbursements to doctors who provide primary care, increasing access to these services for people with Medicare.

    The law provides help for early retirees by creating a temporary re-insurance program that will help offset the costs of expensive health claims for employers that provide health benefits for retirees age 55-64. Scheduled to run from June 21, 2010 through January 1, 2014, the reinsurance program will pay 80 percent of eligible claim expenses incurred between $15,000 and $90,000.

    The law calls for an increased Medicare premium for those individuals earning more than $200,000 a year and married couples whose income exceeds $250,000. The law also applies the Medicare payroll tax to net investment income for couples earning more than $250,000 a year or individuals earning more than $200,000 a year.

    Most of the cost savings in the law are in the Medicare program, which has made many seniors fearful that their benefits will be cut. The cost-saving measures do not affect the basic Medicare benefits to which all enrollees are entitled, but they may affect those enrolled in private Medicare Advantage plans. Medicare has been paying insurers who offer these plans more than it spends on average for Medicare beneficiaries. The original idea of Medicare Advantage was to save money by paying them less, the idea being that private insurers could be more efficient than the federal government. The opposite turned out to be the case.

    Health care reform will pay the private insurers less, meaning that some will choose not to continue their plans and others will curtail extra benefits they offer enrollees, such as reimbursement for gym membership or free eyeglasses. But the cuts will be gradual, with the largest not beginning until 2015. The law also offers bonuses to efficiently run Advantage plans.

    Another provision in the law will cut Medicare reimbursements to nursing homes by about $15 billion over the next decade. While nursing homes get only about 13 percent of their revenue from Medicare, the industry relies on the money to make up for low Medicaid reimbursement.

    A combination of the additional revenue and savings are estimated to extend the life of the Medicare Part A trust for an additional 7 to 10 years from its current insolvency date of 2017.

  • The Elder Justice Act, which will establish an “Elder Justice Coordinating Council” and provide federal resources to support state and community efforts to fight elder abuse.
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  • Provisions that will help protect nursing home residents and other long-term care recipients from abuses, and give families of nursing home residents more information about the facilities their loved ones are living in or considering moving to; and
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  • A number of provisions aimed at ending Medicaid’s “institutional bias,” which forces elderly and disabled individuals in many states to move to nursing homes;
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