Mike and his mother, Shirley, very much wanted to sell Shirley and Robert’s home so that they could move to a senior living facility, where there would be staff able to assist with Robert’s care.  Now they may be unable to close on the sale of the home since Robert has dementia, could not sign his name, and the power of attorney Mike downloaded for $65.00 was not being accepted.

In an ideal world, Robert would have planned ahead for the possibility that he might become unable to make his own financial decisions by making a properly drafted power of attorney and/or revocable trust in advance.  With those legal instruments, Robert could have designated Shirley, Robert, or another person of his choice to make any such financial decisions, including selling his home.  He could have also included instructions on under what circumstances he would be agreeable to moving to such a  facility.

Mike met with an elder law attorney, who offered an alternate solution. When an adult can no longer make their own financial decisions, due to dementia or other age-related health conditions, and there are no incapacity planning documents already in place, we will have to rely on the probate court protective proceedings.  In Robert’s case, right now he just needs someone to have legal authority to sign his name to the deed and other documents necessary to sell his home.  As such, instead of obtaining a full conservatorship, which is an ongoing legal protective proceeding that can be quite complex, the attorney suggests that Shirley or Mike might file a petition for a protective order to obtain the legal authority to sell the home on Robert’s behalf.  The difference between a proceeding to obtain a protective order is that it is typically a one-time occurrence, unlike an ongoing conservatorship.

The request for a protective order will need to be filed in the probate court in the county in which Robert and Shirley reside.  The attorney will need to draft documents explaining to the court why it is in Robert’s best interest to sell the home.  The documents prepared for the real estate closing may need to be provided to the court.  The probate court judge may issue a protective order regarding an individual’s estate and affairs if the court determines both of the following situations exist:

                 F irst, the individual is unable to manage property and business affairs effectively for reasons such as mental illness, mental deficiency, physical illness or disability, or disappearance.

       Second, the individual has property that will be wasted or dissipated unless proper management is provided, or money is needed for the individual’s support, care, and welfare or for those entitled to the individual’s support, and that protection is necessary to obtain or provide money.

After the probate court judge makes those two determinations, the court, without appointing a conservator, may authorize, direct, or ratify a contract, trust, or other transaction relating to the protected individual’s property and business affairs, if the court determines that the transaction is in the protected individual’s best interests.  In this case, the protective order would need to provide that Shirley or Mike can sign Robert’s name on all of the documents necessary to sell the home.

Since this transaction will help Robert get the care he needs and his wife, Shirley, is in agreement with it, there is a very good chance the court will grant the request for the protective order.  However, it may be several weeks before the court date can be held, due to legal notice requirements, so the real estate closing may have to be delayed.  There will be attorney fees, with most elder care attorneys in Michigan handling this type of matter on an hourly attorney fee basis.  It may take 10 to 20 hours total between meeting with Mike and Shirley, reviewing the real estate documents, drafting the probate court documents, and attending and conducting the probate court hearing.  This delay and expense could have been avoided had Robert planned ahead for the possibility of his incapacity.  Since he did not, his family will need to rely on this second best solution.  One of the main functions of the probate court is to deal with these types of situations when people do not have the right estate and incapacity planning in place.

Mike and Shirley decide to go ahead with the protective order proceeding.  Six weeks later, they attend court with their attorney, and the judge grants Shirley the authority to sign any documents to sell the home on Robert’s behalf.  Then Shirley is able to complete the sale of the home and she and Robert move to the senior care facility.

Mike, age 56, was upset.  He had just gotten off the telephone with the realtor who was handling the sale of his parents’ home.  The realtor told him the title company refused to accept the power of attorney that Mike had gotten for his father, Robert.  Now the realtor was saying that Robert had to attend the closing himself and sign the home sale documents in order for the sale to be complete.

Mike thought that would be impossible.  Robert, age 85, suffers from dementia and wasn’t really aware of what was going on and did not sign his name well anymore.  Since Robert had first been diagnosed with dementia a few years ago, Mike and his mother, Shirley had witnessed the steady decline in Robert’s mind and abilities.  At first he just had trouble remembering names and would get confused when he was driving.  Then his personality seemed to change.  Robert had always been outgoing and friendly, but he gradually became mostly silent.  While he would respond in short sentences when spoken to, he rarely initiated a conversation.  Shirley started paying all the bills since Robert no longer kept track of that anymore.  Then Shirley and Mike noticed that though Robert’s long-term memory was good, his short-term memory was bad.  He would forget what day it was and could not remember what he had for breakfast.  At that point, he was diagnosed with dementia and the family doctor gave him a prescription for Aricept.   As his dementia progressed, even his long-term memory became bad and then Robert started wandering the house at night and then would sleep most of the day.  He did not speak much anymore, even when the family prompted him.  Shirley knew that Robert still recognized her, but he did not seem to recognize Mike and other family members.  He would eat the meals she prepared for him, but he had become incontinent and needed help getting to the bathroom, changing his clothes, and Robert needed help in the shower. 

Shirley, who is age 83, was worn out.  Robert’s nighttime wandering was disturbing her sleep and she was having more trouble helping Robert get out of chairs and bed.  Then when Shirley was walking Robert out to the car to go to a doctor's appointment, he slipped and they both fell.  It could have been worse in that Shirley did not break any bones, but she was bruised and in pain and worried about both of them falling again.  Shirley thought that it would be a real disaster if she had broken her hip. Then she may have been in a rehab facility for weeks and then who would care for Robert?

Shirley decided it was time to sell the family home in Rochester Hills and move to a senior living facility where she and Robert could be together and where there would be elder care help to handle Robert’s care.  Mike agreed that was a good idea and found a realtor to list the house.  After the house had been on the market for 5 months, they finally got an offer that was acceptable to Shirley.  The realtor told Mike and Shirley that since Robert and Shirley were on the deed to the home, they owned their home as husband and wife and both of them would need to attend the closing at the title company to complete the sale of the property.  Mike told the realtor that Robert could not come to the closing due to his health.  The realtor told him to get a power of attorney so that Mike could sign all the documents on Robert’s behalf.

Mike got on the internet and downloaded a power of attorney form from the Legal Whirl website that he had heard about.   Mike had heard Legal Whirl’s ads on the radio and their website since the power of attorney was good for Michigan.  Mike answered all the questions online, appointing himself as power of attorney for Robert.  When he was done answering questions, he paid $35 for the power of attorney and then another $20 so the form would be processed that day.

Mike took the power of attorney to Robert and Shirley’s new apartment at their senior residence.  Legal Whirl’s instructions said it had to be notarized and witnessed, so Mike arranged for a notary public to meet him there along with his brother-in-law, Rick to act as a witness.  Mike put the power of attorney in front of Robert, gave him a pen, and asked him to sign it.  Robert sort of just stared at the pen, and Shirley and Mike tried to coax him to sign his name.  Robert did not refuse, but he dropped the pen and just sort of looked around the room.  The notary public said that even if Robert signed the power of attorney, she was not comfortable notarizing it because Robert did not seem to be of sound mind.  Rick got mad and said “can’t you just do it” and “don’t you see that were just trying to help Robert and Shirley out.”  The notary still refused but told Mike and Rick that Michigan’s power of attorney law allowed for it to just be witnessed, so she did not actually have to notarize it for the form to “be legal.”  The notary left and Mike and Shirley tried to coax Robert into singing it again.  This time he started writing his first name but then his signature just ended in a scrawl that went below the signature line and looked like a light scribble.  Mike said that would have to be good enough and he and Rick signed their names as witnesses.  The realtor had said that the title company would need the power of attorney, so Mike faxed it to her.

The day before Mike and Shirley were set to go to the closing to complete the sale is when Mike got the call from the realtor that the title company had rejected the power of attorney.  The title company was worried that Robert’s scrawl for a signature indicated he was ill.  Also, the title company said that Michigan law prevented Mike from acting as a witness to the power of attorney since he was appointed as agent in the document.  That’s when the realtor said Robert would have to come to the closing to sign his name.  After thinking about it, Mike called the realtor back and told her that Robert could not come to the closing or sign his name any better due to his dementia.  The realtor said you better call an attorney to see if the attorney can make a legal power of attorney form that the title company would accept.

Mike was annoyed.  The reason he went on Legal Whirl was to avoid paying an attorney. His parents really needed the money from the sale of their home to pay for their rent and care expenses at the senior facility, so Mike reluctantly called an elder law attorney.

After explaining the situation to the attorney, the attorney said that Robert would not be able to sign a power of attorney.  The reason was that, due to his dementia, Robert lacked the “legal capacity” to make a power of attorney or any other legal instrument, such as a deed or Last Will and Testament.  Mike asked what do you mean by “legal capacity?”  The attorney explained that in order to create a legal power of attorney, one must have the mental competence to reasonably understand the nature and effect of his actions.  That is what is meant by legally capacity; in a nutshell, the person signing the power of attorney must know what is going on and what they are doing.  Here, it was unclear if Robert even recognized his family anymore, so it is clear that Robert did not understand that he was signing a document that would allow Mike to sell his home.

Mike said and “I know that his signature isn’t very good, but isn’t the fact that he put his mark on the document good enough?”  The attorney answered that Michigan’s power of attorney law actually does not require that Robert sign the document, just that he have the mental capacity to know what he is doing.  If Robert was just physically unable to sign, but if he still had his mind, he could direct the notary public to sign the document on his behalf.  While the quality of his signature makes Mike’s Legal Whirl form suspect, it is the fact that Robert does not know what he is doing that is actually the problem.

Mike said “this mental capacity rule just sounds like something a lawyer made up to make things more complicated and expensive.”  The attorney answered that one of the fundamental principles of American law is that once we turn age 18, we are legal adults and we are entitled to make all our own personal, medical, financial and legal decisions; nobody else can make those decisions for us, including a relative or the government.  That is a wonderful freedom to have and is a benefit and not a problem, until one cannot make good decisions for themself due to illness.  Then, if one is ill or incapacitated to the extent that he or she is not able to effectively manage his or her property and business affairs, Michigan law considers that to be a situation where an incapacitated adult needs protection so that his or her rights are protected.

Mike said, “but I am his son and my mother, Robert’s wife is ok with this.  They need the money to pay for the senior facility.” The attorney said he could understand Mike’s frustration, but asked Mike if he would want someone to be able to sell his home or take money out of his bank account without his knowledge or consent?”  Mike said that if he were in Robert’s situation, he would want his wife and daughter to be able to make these decisions for him and to sign his name.  Then he said “since everyone knows this is in Robert’s best interest, the Legal Whirl form should be good enough.”

The attorney said the law provides a straightforward solution for people to avoid the incapacity problem in that the law says a mentally competent adult can designate a person of their choice to be their agent or attorney-in-fact to make financial, legal, and other decisions for them under a valid Michigan power of attorney.  However, it is a legal instrument that has to be created when the person is of sound mind.

 The attorney continued and said “your father did not create and sign a power of attorney before he got dementia, so that might mean that he did not want you to make decisions for him.  More likely, Robert was just like many people:  he did not know it would be a problem or even if he knew he should have legal instruments in place in case he got incapacitated, he procrastinated and never got around to it.”

Mike said if Robert could not make a power of attorney now and could not sign his name to the deed, how will they sell the house.  The attorney answered that this is such a common problem the law provides another solution.  That will be the subject of my next post.

Andrew Byers is an Elder Law Attorney in the Rochester Hills area or Oakland County, Michigan who advises older people and their families on Michigan powers of attorney.

Susan was upset.  She had just gotten off the telephone with adult protective services.  Someone made a report that Ted, her 82 year old father, was being neglected.  Adult protective services had then visited Ted’s home unannounced and without notice to Susan.  Ted let the adult protective services workers in and they saw what Susan had been trying to deal with for over a year:   Ted was unkempt and would wear the same clothes for days.  His papers were scattered all over the house and there was lots of unopened mail.  The kitchen smelled due to rotting food.  Ever since Ted had a stroke about two years ago, Susan had been noticing his mental state was progressively declining and his was friendly personality was changing too.

Ted was a retired engineer and had always been fastidious about his appearance and keeping his home and finances in order.  Susan was the same way and she remembered how she learned how to manage her money and invest from Ted.  Now when she raised the subject about helping him with his bills and mail, Ted would get upset and tell Susan to mind her own business.  Susan did not know where Ted’s accounts were or if his bills were being paid.  Susan hired a maid service to clean Ted’s home, but he would not let them in.  Every time she tried to help him, he blocked her and it just made him mad at her.

Susan recognized Ted’s memory loss.  He did not know what year it was or remember the grandchildren’s names.  Ted had always taken care of himself, but in the months after his stroke, he stopped going to the doctor.  Now, when Susan tried to arrange medical appointments for him, Ted refused to go and said he was in perfect health, when before he was regularly treating for high blood pressure and arthritis.  Ted was no longer filling his prescriptions.  Ted’s doctor’s office and his pharmacy said they could not talk to her without Ted’s permission due to HIPAA.  It was obvious that Ted had some form of dementia and was not able to manage his medication, cook for himself, or take care of his affairs.

Susan was at a loss about what to do.  She could not drag him out to the car and force him to go to the doctor.  Now the case worker from adult protective services was telling her she needed to get guardianship over Ted or the state would apply for guardianship instead.

Susan made an appointment to visit me in my office, and after getting more background information, we discussed the purpose of a guardianship proceeding.  I advised that a guardianship is a protective proceeding that occurs in the probate court in the county in which Ted lives.  In Ted’s case, the guardianship would be in the Oakland County Probate Court.  Under our system of laws, once we turn age 18, no one else can make medical, financial and other personal decisions for us without our consent.  That is the basic freedom we enjoy as Americans.  This freedom and autonomy is good and desired until one cannot make this health care and financial decisions for some reason.  In my elder care practice, the primary reason that prevents seniors from making good decisions is dementia or some other illness related to advanced age.  It appears that due to the effects of his stroke and dementia, Ted actually does not recognize his limitations or that he is not able to attend to his basic needs.

Before someone else can start making medical and financial decisions for an older person in this type of situation, a guardianship and conservatorship proceeding will need to be started.  The law requires that before a probate court judge can appoint someone else to make medical and financial decisions, there has to be a proceeding to determine if the senior is actually incapacitated and, if so, who should be their guardian and conservator.  This is because to appoint a guardian or conservator for Ted will limit his rights and freedom.   Guardianship and conservatorship are referred to as “protective proceedings” in Michigan because they are designed to protect the freedom of the senior and, if it is determined that they are legally incapacitated, to make sure they are taken care of after a guardian and conservator is appointed.

Susan asks what the guardianship process is.  First, a petition will have to be filed in the probate court.  The petition must indicate why Susan thinks Ted needs a guardian.  Once the petition is filed with the court, the court will set a hearing date for the petition and appoint a guardian ad litem.  The guardian ad litem (GAL) is typically an attorney and the GAL’s responsibility is to investigate the situation and make a recommendation to the judge whether the senior needs a guardian and conservator and, if so, who should be appointed.  The GAL will have to visit Ted and advise him of his rights.  Some of his rights are that Ted can hire his own attorney or have one appointed for him to represent him at the hearing.  Ted can contest the appointment of a guardian and conservator or he can agree to it and tell the court who he wants to be appointed.  In this case, it seems that Ted will contest it.  He even has the right to have a trial by jury to decide if he needs a guardian or not.

Susan asks “how will the court decide if Ted needs a guardian?”  I advise that the legal standard the court, or jury if Ted demands it, will consider is whether he lacks sufficient understanding or capacity to make or communicate informed decisions because of “mental illness, mental deficiency, physical illness or disability.”  Evidence will need to be presented to the court to prove this.  This evidence can include the testimony of Susan and other people of Ted’s behavior that they have observed.  If the probate court judge believes that medical evidence is necessary, the judge can order Ted to undergo a medical evaluation.  Once a guardian is appointed, the guardian can make all medical decisions for Ted, including arranging for medical appointments, getting information from doctors and hospitals, and admitting Ted to facilities, such as hospitals, assisted living residences or nursing homes. 

Susan thinks that being appointed as Ted’s guardian would be helpful, but it will surely make Ted upset.  Also, if Ted refuses to go to a doctor’s appointment now, how will having a court order saying she is Ted’s guardian actually get him to go?  I advise that though it is rare that this needs to be done, if the protected person refuses to cooperate after a guardian is appointed, the guardian has authority to have the sheriff physically transport the person to the doctor or hospital.  That would surely be a stressful and contentious situation for everyone involved, but sometimes it cannot be avoided.  Once the person is admitted to the hospital, sometimes having their medication straightened out and getting some treatment of the underlying medical condition results in them being less adversarial, so then the guardian has an easier time managing their affairs.

Susan is upset that she needs to take this action, but decides the best decision would be to file for guardianship and conservatorship for Ted.  In future posts, I will address some of the other issues regarding guardianship and conservatorship for the elderly.

Andrew Byers is a guardianship attorney and represents guardians and conservators in the Oakland and Macomb County probate courts as part of his elder care practice.

As an elder care attorney, a phrase I hear from time-to-time is that an annuity is “Medicaid friendly.”  Annuities are a written contract with an insurance company to receive a specific amount of payments for a term of years or for the life of an individual.  The person obtaining the annuity gives the insurance company a lump sum of money in return for receiving the payments back as an income stream.  There are many good reasons to consider an annuity, such as for income tax deferral or to obtain a higher interest rate then can be got at a bank.

Michigan’s Medicaid regulations for the nursing home program and MI Choice Waiver home program do not contain a description of a “Medicaid friendly” annuity.  The regulations do, however, define how an annuity has to be structured in order for a senior to qualify for Medicaid.  I would refer to that as a Medicaid-compliant annuity.

Under Michigan’s Medicaid regulations, an annuity is considered either an asset or an income stream.  If, under the terms of the annuity contract, the senior can liquidate the annuity and receive a lump-sum payment back from the insurance company, the annuity is considered an asset that counts toward Medicaid’s $2,000.00 countable asset limit.

If, however, a senior only has a right to receive an income payment from the annuity, Michigan’s Department of Human Services will consider the annuity to be income, if the following requirements are met:

1.      The annuity must be irrevocable.  That means the senior has given up the right to cancel the contract and get their lump sum payment back.  If the annuity was revocable, it would be considered a countable asset as note above.

2.      The annuity contract must be issued by an insurance company that is licensed in the United States and by a financial agent who is licensed by the State of Michigan.  This requirement is to prohibit the use of “private annuities,” which are used in some estate planning situations.

3.      The annuity payment must be solely for the benefit of the person applying for Medicaid or that person’s spouse.  This means a senior cannot purchase an annuity and have the income stream paid to another person while qualifying for Medicaid.

4.      The annuity must be “actuarially sound” so that the money paid to the insurance company is paid back to the senior within their life expectancy as defined by the Department of Human Services.   This means that a Medicaid-compliant annuity must be an immediate annuity, not a deferred annuity, where payments may not start for a number of years.

5.      The annuity payments must be in equal amounts.

If the above 5 requirements are met, the annuity will be considered Medicaid-compliant.  If it is the Medicaid applicant’s annuity, the income received from the annuity each month will have to be paid to the nursing home as part of the patient-pay amount (see other blogs on this topic), so the nursing home will be receiving the monthly annuity payments.  If the annuity is owned by the community spouse of the nursing home resident, the community spouse will be able to keep the annuity income. 

There is one final and extremely important requirement for an annuity to be considered Medicaid-compliant.  If the annuity was obtained or the contract was amended on or after February 8, 2006, then the State of Michigan must be designated as the primary beneficiary of the annuity when the contract owner dies, unless there is a community spouse, in which case the State must be named as the beneficiary after the spouse.  This means that in many situations, the state will receive any money remaining in the contact when the Medicaid applicant dies.

If an annuity does not comply with the above requirements, obtaining it will be considered a divestment, and the senior applying for Medicaid will not qualify for a period of time.

As you can see, annuities are not really Medicaid friendly, in that they either count toward the $2,000 asset limit or are considered income, income that may have to be paid to the nursing home.  What some financial advisors mean when they say Medicaid friendly is that you can cancel the contact and get your money back if you are in a nursing home. 

However, there are a few situations where Medicaid-compliant annuities are very helpful in long-term care planning and Medicaid and VA Aid and Attendance qualification.  That will be the subject of another post.

Andrew Byers is an elder care attorney with a law practice in the Rochester Hills, Michigan area.

Certain types of trust may be used by seniors who want to protect their savings and other assets from creditors and long-term care costs.  These trusts are referred to as “income-only trusts” or “Medicaid Asset Protection Trusts.  The person who creates the trust is called the “settlor.”  These trusts may be drafted so that the settlor can receive the income and dividends generated by the assets in the trust.  Alternatively, if this income is not needed, it can be allowed to accumulate in the trust, where it is added to principal.  These trusts work well for seniors who do not usually need access to the principal of some of their savings.  Such trusts are an excellent legal tool that allow seniors to obtain financial assistance to help pay for long-term care while preserving some of the senior’s assets.

If the settlor’s other sources of income, such as Social Security or a pension, are sufficient to provide for the settlor’s daily needs, then the income generated by the assets in the trust can be added to the growing principal and will never have to be used to pay the settlor’s expenses.  Moreover, the assets in the trust typically remain intact for the settlor’s lifetime, ensuring that the money will be there for emerge purposes while the settlor is living.

Both the income-only trust and Medicaid Asset Protection Trust are irrevocable trusts, which means the settlor gives up the ability to remove the trust principal themself.  It is that feature which protects the savings and assets in the trust from a Medicaid spend-down.  While these trusts are irrevocable, they are actually quite flexible in that the settlor retains the ability to change who the trustee of the trust is and who will inherit the trust assets when the settlor dies.  Also, the manner in which assets in the trust are invested can be changed.  For example, if a mutual fund is transferred to the trust, the mutual fund can later be sold and the proceeds invested in another mutual fund or the proceeds can be deposited in a bank account titled in the trust.  If the home is transferred to such a trust, the home can later be sold.  A new home could be purchased in the name of the trust or the proceeds received from the sale of the home can be saved in an account titled in the trust or be invested.

Upon the death of the settlor, the assets in the trust are distributed to beneficiaries of the settlor’s choice (not the state or federal government) and without the need to be settled in probate court.

An important benefit of these trusts is they prevent the creditors of the future beneficiaries of the trust from garnishing or seizing the trust assets.  The future beneficiaries of the trust are often the settlor’s children and/or grandchildren.  For example, if the settlor’s middle-aged adult daughter is getting divorced, the soon to be ex son-in-law would not be able to attach the assets in these trusts.  As such, these trusts provide for multi-generational legacy planning and keep the settlor’s assets in their family bloodline.  They provide a way for grandchildren to receive an inheritance from their grandparent that could be used to pay for a college education while providing a remembrance of the grandparent.

A Medicaid Asset Protection Trust is very useful to plan for one’s home.  This is particularly important for single seniors who own a home, but later need to qualify for Medicaid to help pay for the $7,000.00 monthly nursing home cost.  While one can own a home and qualify for Medicaid, if the home is sold, the cash proceeds received would have to be spent down to $2,000.00 or otherwise protected in order to keep Medicaid eligibility.  If instead the home had been transferred to a trust at least 5 years before needing to apply for Medicaid, the home could later be sold without jeopardizing continued eligibility for Medicaid. 

The receipt of the United States Department of Veterans Affairs improved pension (“Aid and Attendance”) can be very helpful for wartime veterans and their surviving spouses in paying for long-term care costs, including the cost of room and board at such senior independent living residences.

As explained on other pages of my website, in order to qualify for Aid and Attendance, the veteran or surviving spouse must meet certain military service, medical, asset, and income criteria in order to qualify.

For the income criteria, if the veteran or surviving spouse’s “unreimbursed medical expenses” exceed their income, the veteran or surviving spouse would meet the income criteria to receive Aid and Attendance.

Unfortunately, the VA has recently issued a policy making it harder to count the cost of independent senior living facilities as an unreimbursed medical expense, making it harder for veterans and surviving spouses who live in these facilities to use the cost to qualify for Aid and Attendance.

By way of background, many seniors who live in independent senior living facilities need the meal preparation, housekeeping and laundry, transportation, 24-hour staffing, emergency pull cords, and security these facilities provide.  This is a large group of seniors who could not live on their own anymore, but could live in these facilities with the above services being provided.  These independent living facilities have been a less institutional and less expensive option for these seniors then assisted living and nursing homes.

The VA’s recent new policy states that the VA will only count the cost of the room and board payment paid to such senior living facilities if the facility provides “custodial care.”  “Custodial care” is then defined in the policy to mean the veteran/surviving spouses needs assistance with the activities of daily living.  You would think activities of daily living means a senior needs help with meal preparation, laundry, and having someone on hand in case of a fall or emergency (the 24-hour staffing).  However, the VA policy defines activities of daily living much more restrictively to mean that a senior needs assistance with bathing or showering, dressing, eating, getting in or out of bed or a chair, and using the toilet.  In other words, if a senior can feed themselves but not prepare their own meals, then the VA will not count the cost paid to an independent living facility for meal preparation as expense that helps qualify the veteran/spouse for Aid and Attendance.  Even worse, the new policy states the VA will not consider services such as emergency pull cords, 24-hour staffing, and providing security as an unreimbursed medical expense that can help veterans or their surviving spouses qualify for Aid and Attendance.  The effect of the policy may be to reduce the type of qualifying facilities a veteran or surviving spouse can live to the more institutional and expensive assisted living and nursing home type facilities.

However, veterans and surviving spouses living in such independent senior living facilities should not give up using the costs of those facilities to obtain Aid and Attendance.  Oftentimes such facilities provide the meal preparation, housekeeping and laundry, security, and emergency pull cords I referenced above, but then they have another care company provide care services to their residents.  The resident has to pay the care company an additional fee for the care services. 

The new VA policy indicates that if the veteran/spouse’s physician states in writing that the veteran/spouse must resident in the senior living facility in order to contract for custodial care services provided by a third-party, the VA will then count the cost of room and board paid to the senior living facility as an unreimbursed medical expense.  However, in order for this to work, the veteran/spouse will need to be receiving the more restricted custodial care services I described above, i.e., assistance with bathing, getting dressed, etc., not just meal preparation and medication management.

Another effect of the new policy is that elder care attorneys will need to more carefully develop the physician’s statement and then link it to the services being provided in such independent senior living facilities so that the VA will count the cost of the room and board paid to the facility as an unreimbursed medical expense.  All too often, I see situations where the adult child or a senior veteran/surviving spouse just submits the application to the VA to see what happens and then wonders why it gets denied.  As I have written elsewhere, Applying for Aid and Attendance is Not a Do-It-Yourself Project.  With the VA making it harder to qualify, it’s more important to consider getting the help of an elder care attorney who is experienced in long-term care planning, including Aid and Attendance, in making sure a qualifying case is in place before submitting an application for benefits.

The new policy only applies to claims filed after October 26, 2012.  If a veteran/spouse is already receiving Aid and Attendance and they move to a new facility, the new policy would also then apply to them.  As such, if one is living in an independent senior living facility and receiving Aid and Attendance, before moving, the effect of the continued receipt of Aid and Attendance must be carefully considered.

The simple answer to this question is you should never apply for Medicaid until you know you qualify.  For a single person, that means the nursing home resident does not qualify until they have $2,000 or less in countable assets.  For a married couple, that means the spouse who is not in the nursing home has spent down do the “protected spousal amount.”  You can read more about these countable asset levels and qualification criteria on my website.

A more substantive answer to when one should submit the Medicaid application is, in Michigan, it is better to qualify and submit the application as soon as reasonably possible after it is determined that the elder definitely needs to stay in the nursing home.  The reason for this is the application process will be less complex if less time has passed between the date the elder first was hospitalized and entered the nursing home and when the application is submitted.

Why will the application process be less complex?  The answer to that question has to do with a special date, which is referred to as the “baseline date” and the Michigan Medicaid look-back period.  For a nursing home resident, the “baseline date” is the date that the elder was both in a nursing home and eligible for Medicaid.  In Michigan, the Department of Human Services uses the baseline date to calculate the look-back period.   The look-back period is the period of time in which the Department of Human Services reviews gifts, transfers, and divestments that the person applying for Medicaid might have made.  The look-back period is always 60 months prior to the baseline date.  If I were writing the Medicaid regulations, I would have used “review and disclosure period” instead of look-back period, since it is a clearer way to describe what is being required:  the person applying for Medicaid (and their family member that is assisting them) must disclose all gifts, transfers and divestments that have been made in the 60 months before the baseline date and the Department of Human Services has a right to request the bank account statements and all other financial records for that period.

Here is an example of the baseline date and look-back period.  Betty, age 85, recently was admitted to a nursing home after being hospitalized for a week.  Betty entered the hospital on December 29, 2012.  Since she is in a nursing home, and assuming she meets the asset criteria to qualify for Medicaid, Betty’s baseline date is December 29, 2012.  Since the look-back period is always 60 months, this means the Department of Human Services can review any Betty’s financial records back to December 29, 2007 to see if she had made any gifts, transfers or divestments.

Here’s why it is better to apply for Medicaid sooner rather than later after entering the nursing home.  The Department of Human Services is typically particularly interested in the financial records and statements that include the 3 following time periods:

1.      The date(s) the Medicaid applicant made any gifts, transfers or divestments.  All such transactions made within 60 months of the baseline date must always be disclosed;

2.      The date the Medicaid applicant actually entered the nursing home; and

3.      The statements for the month in which the Medicaid application is submitted.

To the extent that the less time has passed between first entering the nursing home and submitting the application, fewer statements may be requested and have to be produced and fewer transactions explained.  This will make the application process easier and faster because you will be more likely to have all the relevant records and be able to remember what the transactions were about, if Medicaid has questions.

Instead of the dates above, let’s assume that Betty entered the nursing home on January 15, 2011 but does not apply for Medicaid until two years later on January 15, 2013 because she has more than $2,000 in savings.  When the application is submitted, there is a good chance that the Department of Human Services (“DHS”) will want the statements and other financial records from January 2011 and maybe even all the statements and records for the two years in between 2011 and 2013.  DHS will be particularly interested in reviewing what has gone on with Betty’s money since she has been in the nursing home.  I hope someone kept all those statements and receipts and can also explain any transactions that Medicaid may have a question about, i.e., “the June 2011 checking account statement shows a check in the amount of $985.  What was that for?”  Otherwise, you might have to order these statements from the bank and other financial institutions in order to recreate the paper trail.  The Department of Human Services may only give you 10 to 14 days to do this, so it can create a lot of stress and hassle.  If you cannot respond in time, the application may be denied, resulting in problems with the nursing home and payment.

Let’s change our example again and assume that Betty entered the nursing home on December 5, 2012 and now, in January of 2013, it is clear that she needs to stay in the nursing home. Betty has not made any divestments in the last 5 years, so when her application is submitted in January 2013, the Department of Human Services may only require financial statements from December and January.  If she has made divestments, those will need to be explained and the statements for that time period should be submitted too.

What if Betty is not yet eligible for Medicaid in January?  That is she has more than $2,000 in countable assets.  It would be a good idea to meet with an elder care attorney who focuses on Medicaid qualification.  If Betty does not yet qualify for Medicaid but need nursing home care, instead of just spending down over several years, it might be better to use some legal strategies to accelerate qualification, so that the application can be submitted sooner.  This will shorten her disqualification period for having excess assets. 

Then the application can be submitted sooner rather then later, so that the application process is easier.  Whether this is the right thing to do depends on the unique circumstances of each person’s situation.  If Betty’s Medicaid application can be submitted sooner rather than later, less financial records may be requested, making the Medicaid application smoother and less complex for Betty and her family.  In addition the nursing home will be happy if the processing of the Medicaid application does not drag on for months.

I have been practicing law since 1996 and there have been a lot of changes in that time.  One of the biggest changes has been in the federal estate tax.  When I was a new lawyer, the estate tax applied to estates over $600,000.  The estate tax rate ranged from 18% to 55%.  With the recent passage of the fiscal cliff deal, which is officially named the American Taxpayer Relief Act of 2012, the estate tax exemption amount has been set at $5,120,000 per person and that amount is indexed for inflation.  This means the amount of an estate people can leave free of estate tax will continue to grow without requiring further action by Congress. 

When the estate tax amount was $600,000, it clearly was an issue for middle class families who had a home, an IRA, some savings, and life insurance.  With the estate tax exemption now being set at $5,120,000, the estate tax will only be an issue for wealthy individuals.

The estate tax has been quite a political issue since 2001, when legislation was passed raising the exemption amount each year until it reached $3,500,000 in 2009 and then and providing for a total phase out of the estate tax in 2010.  Without further legislation, that law expired (a “sunset” clause) in 2011, and the estate tax exemption would have decreased to $1,000,000.  Congress acted to prevent that with another temporary fix and the estate tax exemption continued to rise until it reached $5,120,000 in 2012.  However, that legislation also had a sunset clause, which meant the estate tax exemption would revert to $1,000,000 on January 1, 2013.

This legislation appears to now settle the estate tax because it does not include another sunset clause.  These sunset clauses made it difficult to plan since estate planning attorneys and their clients did not know what the exemption would be with Congress passing laws that temporarily increased the tax exemption, but with an expiration date.

While some income taxes were raised in the fiscal cliff deal, the change to the estate tax is a continuation of a long-term trend to cut taxes.  Some analysts claim that setting the estate tax exemption at $5,120,000 instead of the $1,000,000 it would have reverted to will increase the deficit by $40 billion per year.  For the time being, Congress and the Obama administration have decided not to look to a lower estate tax exemption for increased revenue.  That is good tax news for middle class families.

A nationwide class action lawsuit, entitled Jimmo vs. Sebelius, was filed to challenge the improvement standard.  The lawsuit was recently settled.  The effect of the settlement is that the Center for Medicare & Medicaid Services (CMS), the federal government agency that administers the Medicare program, will revise the Medicare policy manuals in order to correct suggestions that Medicare coverage is dependent on a beneficiary "improving." The new policy provisions will state that Medicare can cover skilled nursing and therapy services necessary to maintain a person's condition, which will bring the Medicare manuals in line with the actual Medicare law.

It is important to remember that Medicare will still only cover up to 100 days of skilled nursing and rehabilitation services.  The Jimmo settlement does not change that.  Rather, the settlement will help ensure that more seniors get their full 100 days of Medicare coverage, even if the additional therapy will just help them maintain their current condition.  The continuation of such therapy may allow some seniors to recover enough to leave the nursing home.  For others, it may at least slow further deterioration of their health.  In addition, the settlement does not change the copay requirement.  While Medicare Part A covers all of the first 20 days of rehab. and skilled nursing services, beginning on the 21^st day, there is a $144.50 daily copay that the patient must pay.  Often, this copay will be covered the senior’s supplemental health insurance policy.  Also, if a senior needs so much assistance with the activities of daily living that they just need to living in a nursing home, the senior may still need to qualify for Medicaid long-term care coverage to help pay the nursing home bill on an ongoing basis; the Jimmo settlement also does not change that.

It appears that wartime veterans and their surviving spouses who are receiving the United States Department of Veterans Affairs Aid and Attendance pension will receive a cost of living adjustment in their pension rate in 2013.  While the official numbers have not been released yet, the 2013 pension rates should be close to the following:

• $1,732 per month for a single veteran
• $2,054 per month for a married veteran
• $1,113 per month for the surviving spouse of a wartime veteran

While that is good news for people currently receiving this benefit, storm clouds loom on the horizon in terms of changes to law that would affect people applying for the benefit in the future.  A look-back period is being considered and the VA and Congress is also considering restricting the program to make it a poverty-level program.  If a senior citizen who is a veteran or their surviving spouse could qualify for Aid and Attendance, it would be wise to have one’s long-term care planning done sooner rather than later so an application can be submitted under the current laws and regulations.

Lawyer Andrew Byers advises older veterans and their families on Aid and Attendance as part of his elder law practice.