Donna makes sure her mother gets out of bed, gets dressed, and has breakfast.  She gives her mother her morning medications.  She checks the mail to see if any bills need to be paid.  She tosses out any solicitations.  Her mother is generous to charities asking for money.  Donna’s mother was diagnosed with Alzheimer’s two years ago.

Today is Tuesday, so Donna will be back later to take her mother to the doctor.  Wednesday is foodshopping.  Thursday is housecleaning.  She spreads out the chores so that she can work part-time.  She has a son in college and her daughter will graduate from high school next year.  She used to work full-time until her mother needed help every day.

After dinner with her husband and daughter, she returns to make sure her mother takes her evening medications and gets to bed without incident.  She makes sure the nightlights are working so her mother can navigate to the bathroom during the night.

Then she goes home and worries.

She knows it will not get better.  Her mother will need more and more help as time goes on.

Donna came to talk to me about the future.  What are her options?  Hiring in home care?  Assisted living?  A nursing home?  How will this care be paid for?  Are there any government programs that can help?  Donna has been told that Medicaid would require her mother to spend down her assets to almost nothing.

Then she asks me the question I have heard many times.  “Can I be paid for the care that I give my mother?” Her mother understands the situation and would prefer to give her money to Donna rather than lose it to Medicaid.  Her mother feels guilty because Donna cannot work full-time.  Can she compensate her daughter for all that Donna has done and will continue to do for her?

My answer is No and Yes.

Unfortunately, the answer is No as far as the last year and a half are concerned.  Fortunately, the answer is Yes as far as the future is concerned.  The trick is to put a personal care agreement in place.

With a personal care agreement, Donna’s mother will be able to pay Donna for all that she does: the personal care, such as the daily visits to make sure her mother eats and takes her medications; the trips to the doctor and shopping; even the cleaning and the laundry.  Virtually everything that Donna does for her mother can be covered by the agreement.

Two things can be accomplished with a personal care agreement.  As already mentioned, Donna can be compensated for her time and efforts.  But what if Donna says to me, “I don’t want to take my mother’s money!”  I would then explain to Donna that she doesn’t have to spend the money.  She can hold it for her mother.  This strategy will help greatly if Donna’s mother needs Medicaid for nursing home care in the future.  And with a diagnosis of Alzheimer’s, she almost certainly will.

Let me explain.

Medicaid has a five year look-back period.  When you apply, Medicaid looks back five years to see if you made any gifts or transferred any money.  If you did, Medicaid will deny benefits.  If Donna’s mother were to pay Donna for her caregiving, and no personal care agreement were in place, Medicaid would consider any such payments as gifts and deny benefits.  Medicaid assumes that Donna was helping her mother out of love and affection, not for compensation.  The personal care agreement changes all that.  With a personal care agreement, Medicaid cannot consider payments to Donna as gifts because there is a written arrangement.  Even if Donna is holding the money for her mother.

Therefore, a personal care agreement can be a golden opportunity to shelter assets from nursing home costs.  If you are caring for a family member or loved one, it would pay to see if a personal care agreement can help in your situation.

Nursing homes in our area can easily cost $10,000.00 a month, and Medicaid coverage may have barriers… Like the Medicaid spend-down… Like the 5 year look-back period… Like penalties for making gifts.

If you are not aware of how this system works, you should be. Medicaid has become, by default, the long-term care insurance of middle class Americans. Qualifying for Medicaid for long-term care may be the only thing standing between your wife or husband living in poverty if you need nursing home care.

But Medicaid for long-term care will become increasingly unavailable to the middle class in the rush to cut benefit programs, both in Washington and Harrisburg. We can show you what you can do to protect yourself.

There is good news however. If you plan early enough, it will always be possible to protect assets no matter what budget cuts come down the road. The trick is to plan before the five year look-back period comes into play. This means you have to plan for long-term care when you are too healthy to need it or even to think about it. I know this is contrary to human nature – “I’m never going into a nursing home!” But tough times call for clever measures. Planning early can make long-term care available to you, when you need it, without going broke.

Let us show you how to stay ahead of the curve. Come to one of our free seminars:

•   Tuesday, September 27 at 2:00 p.m.
•   Tuesday, October 4 at 6:00 p.m.

These families have missed out on a golden opportunity.  Had they planned in advance, Mom could have compensated her caregivers with money that will now go to the nursing home.

Gifting of assets is very problematic for a person entering a nursing home. It can cause them to be denied Medicaid.  What we call a gift, Medicaid calls “a transfer for less than fair consideration,” in other words, Mom gave away money or assets and did not get something of comparable value in return.  Medicaid penalizes transfers.

Paying a caregiver is not a transfer for less than fair consideration; instead, it is compensation for services rendered.  Mom is allowed to pay someone (even a friend or relative) to provide her with needed services.  This is permitted by Medicaid law and no penalty will be triggered provided it is done properly.  The first step in doing it properly is to have a written agreement at the outset of the arrangement.  Unless there is a written contract when the services are rendered, the law presumes that the care was provided out of love and affection with no expectation of compensation. Any payment made after the fact will be considered a gift, no matter how hard the caregiver worked.

Services do not have to be skilled or medical in nature in order to be compensated.  The types of services for which Mom can pay a caregiver include, by way of example, housekeeping, laundry, food shopping, meal preparation, help with taking medications, being driven to the doctor or to church, assistance with bathing or other grooming tasks, and financial management.  The list goes on and on.

Here are the steps to follow in setting up a family care agreement:  1) there must be a written, legally binding, and properly drafted and executed contract; an oral agreement will not work; 2) Mom must be evaluated to determine and record her care needs; and 3) the amount of the caregiver’s compensation must be comparable to what is being charged in the marketplace.

The attorneys at Levandowski & Darpino can draft an appropriate caregiver agreement that will satisfy the requirements.

• You decide who your agent will be in case of serious illness or incapacity.
• Avoid court supervision of your affairs (without a durable power of attorney, a court must appoint a guardian to make decisions for you).
• A “durable” power of attorney remains in effect even after you become disabled or incapacitated.
• Your agent is obligated by law to act in your best interests.
• A power of attorney can be revoked at any time if you are not happy with what your agent is doing.
• Executing a power of attorney does not mean that you can no longer make decisions for yourself; you continue to make your own decisions and handle your affairs as long as you are capable of doing so.

It bears repeating that, if you do not have a power of attorney or if your power of attorney is not drafted properly, and something should happen that results in your inability to make decisions, your family will face one or more court proceedings and a court-supervised guardianship.  Court proceedings are costly and time-consuming.  In addition, the guardian’s powers will be limited and carefully monitored by the court and the person appointed as your guardian may not be the person who you would have chosen to act on your behalf.

One final note:  You may want to consider what elder law attorneys sometimes call an “enhanced” power of attorney.  You can supercharge your power of attorney by giving your agent the ability to take advantage of asset protection strategies should you need long-term care in an assisted living facility or a nursing home.  In Pennsylvania, such a power of attorney has to be worded just right.

Many kinds of trusts:
Much confusion arises because there are many different “flavors” of trusts, meaning that there are many different types of trusts and various reasons, purposes and goals for a trust. If a person tells me they have a “trust” it is like telling me they have a vehicle.  Without more information, I don’t know anything about the vehicle. Is it a car, motorcycle, bicycle, truck, scooter, boat, etc.?

Revocable Living Trust:
Many people are familiar with one kind of trust called a revocable living trust. This kind of trust works like this:

• The grantors (usually a married couple) create the trust making themselves trustees and lifetime beneficiaries;
• They designate whoever they want (usually their children) as beneficiaries upon their death;
• They title their assets in the name of the trust so that the trust is the technical “owner”;
• The couple are their own trustees, maintaining control of the assets in the trust during their lifetime;
• At death, the successor trustees (usually their children) distribute the assets to the beneficiaries (usually the same children).

Among its benefits, a revocable living trust provides for orderly distribution of assets at death and provides a vehicle for managing assets during the incapacity of the grantors. It is generally thought of as a will substitute which avoids probate at death.

A revocable living trust is not an asset protection or tax saving tool. Different kinds of trusts are used to accomplish these goals.

Other types of trusts:
Whether done in conjunction with a revocable living trust or in a different trust document altogether, trusts can accomplish a myriad of good results. For example trusts can:

• provide asset protection from future nursing home costs.
• reduce the likelihood of will contests.
• coordinate distribution of assets through one vehicle.
• avoid probate (and double probate if there is out-of-state real estate).
• provide maximum privacy.
• prevents court control of a bequest to a minor.
• save on estate taxes.
• provide for distribution to beneficiaries at specified ages or over a period of time.
• provide for assets to be held for beneficiaries with special needs.
• provide for assets to be held for beneficiaries who have creditors or who cannot handle money.
• provide for education of grandchildren.
• provide for a second spouse or partner.
• provide for pets.
• protect assets for Medicaid eligibility.

Conclusion:
The use of trusts is not new . . . far from it. Trust law and its foundation goes back centuries. What is new is that trusts have found a home with the middle class. The middle class has discovered that trusts can provide solutions to common estate planning, asset protection and elder law concerns. In our practice it is common for our clients to embrace these very versatile tools.

Medicaid is the only government program that will pay for care in a nursing home.  It is also the most impenetrable program that we have ever dealt with.  Information available to the public is often confusing, only partially correct, or downright wrong.  This misinformation has led to a number of commonly believed Medicaid myths.  Some of these myths are exposed in this post.

MYTH:  “I have to give everything I own to the nursing home.”

THE TRUTH:  The nursing home does not want your property.  What they want is to bill you every month at their private pay rate.  Although Medicaid would like you to spend down all of your assets (until there is only $2,400 left!), the truth is there are legal steps you can take to protect a sizable portion of your assets and still be eligible for Medicaid. Even if you are already in a nursing home.

MYTH:  “I have to wait 5 years to get Medicaid if I give any of my assets or property away.”

THE TRUTH:  There are legal strategies for dealing with the “5 year look-back period.”  Even if you wait until you are ready to go into a nursing home or are already in a nursing home before taking advantage of these strategies, you will not have to wait 5 years to get Medicaid.

MYTH:  “My husband and I have separate property and we even have a prenuptial agreement, so my property is protected if he goes into a nursing home.”

THE TRUTH:  Medicaid ignores prenuptial agreements. When a married person applies for Medicaid, assets in either or both spouse’s names are considered by Medicaid to be available for long term care.

MYTH:  “Medicare will cover my nursing home expenses.”

THE TRUTH:  Medicare only covers a small portion of nursing home care.  Many people are surprised to learn this.  Medicare only pays for skilled care in a nursing home.  Skilled nursing home care is usually needed after discharge from a hospital where a patient needs physical therapy or some other type of rehabilitation.  In this situation, Medicare will pay up to 100 days of rehabilitation.  After rehabilitation ends or the 100 day limit is reached, Medicare coverage stops.

These are only a few of the Medicaid myths that we frequently encounter.  More myth-busters will be provided in future posts.

It is the old small government versus big government debate.  Who do you trust more:  big business or big government?  Let’s rephrase that question.  Where does any individual have more influence?  With big business as a customer, maybe among thousands nationwide?  Or as a voter of local congressmen, congresswomen, and senators?

It will be an interesting debate.  A whole lot will be riding on the outcome.

I, for one, will be following closely.

The issue can show up in a number of ways.  Bills not getting paid.  Unopened mail piling up.  Papers in disorder.  Perhaps even utilities having been shut off.

Some parents realize that they need help and gladly share their financial information with their children.  Some parents guard that information come hell or high water because they don’t want to relinquish any measure of independence.  Some parents are in denial.  Some are embarrassed.  Some parents might not completely trust their children.  Whatever you do, don’t be judgmental.

Every family situation is different, so there is no one surefire solution.  Here are some tips for helping out:

• Don’t be pushy. Gently offer to help Mom and Dad with paying the bills and budgeting.  Sit down periodically and go through all accumulated bills.  You can write out the checks and Mom or Dad can sign them.  Set up automatic payment plans for routinely recurring bills.  Be clear that you are trying to help them on their terms and not trying to take control away from them.
• Take advantage of online banking. You can access and monitor Mom and Dad’s accounts without being obvious about it.  If any questionable transactions are detected, such as incorrect or duplicate payments or payments made to someone that you don’t recognize, you can act quickly.  Alternatively, ask Mom and Dad to arrange to have banks and other financial institutions send copies of their statements to you.
• Make sure a durable power of attorney is in place. A properly drafted and executed durable power of attorney will allow you to take control legally when necessary, especially when a parent’s capacity declines.  Tell Mom and Dad that a power of attorney will allow you to respect their wishes.  A power of attorney must be signed before a parent loses mental capacity.  Do not mail an original power of attorney to anyone.  A power of attorney should not be kept in a safe deposit box; keep it in a fireproof safe.
• Use reverse psychology on the role reversal. Put yourself in their shoes. In a perfect world, the parent takes care of the child.  You can appeal to a parent’s sense of the proper order of things by stressing that it would give you peace of mind to help with the finances.  Mom and Dad may then see this as taking care of you and not as a reflection of their declining capacity.
• Communication is key. If you are managing Mom and Dad’s finances, don’t be a bully.  Discuss all matters.  Include them in decision-making.  Let them know what you are doing with their money.  To the extent possible, try to keep all siblings in the loop.
• If financial paperwork is in disorder, it’s time to do some detective work to get a handle on Mom and Dad’s income, expenses, and savings.  Start with the most recent tax return.  Schedule B should list interest and dividends reported by financial institutions.  If Mom and Dad have an accountant or financial advisor, check with him or her.  Monitor mail for incoming statements, bills, letters from collection agencies, etc.
• Keep a record of everything that you do. This includes checks that you write, receipts for cash purchases, and especially any reimbursements to yourself for anything you may have bought with your own money.

There are no easy answers.  You may have to try different approaches to see what works best for your family.  The one universal piece of advice I can give you is not to wait until it is too late.  You and your parents will regret it.