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Helping Someone With Dementia Sell the Home

Selling the home through guadrianship

Sometimes, a home must be sold, but the homeowner is no longer able to sign a listing or sale agreement due to cognitive impairment, confusion, advanced dementia or severe and persistent addiction issues (i.e., Wernicke-Korsakoff syndrome), or new onset dementia after recovering from COVID-19.  https://www.msn.com/en-us/health/medical/covid-19-pneumonia-increases-risk-of-dementia-study-says/ar-AAWpSwY,  Others may be temporarily incapacitated due to cardiac issues, surgery, or severe illness.  These conditions can prevent an adult from being temporarily or permanently able to make important financial, medical or legal decisions.  Adults who can no longer make decisions may be incapacitated.  And in real estate bubble with many residential properties reaching their peak value, it’s critical to act fast to accept the best home sale offer.

Unfortunately, incapacitated adults are unable to enter into a binding contract, such as an agreement to list or sell the home. When this happens, one option may be to use a general durable power of attorney or a real estate power of attorney to sell the home.  But that can only be successful where there is already a valid general durable power of attorney or real estate power of attorney in place.  If there is a power of attorney, and the homeowner is able to make decisions, the home cannot be sold through a power of attorney without the homeowner’s consent to the sale.  Giving a power of attorney to a trusted adult child or friend is like giving them an extra set of keys to the car. You can always take back the keys when you wish.

More to the point, a power of attorney is an important legal document by which the principal (i.e., the person signing the power of attorney) gives authority to an agent to carry out the affairs of the principal.  The catch-22 is that in order to make a power of attorney, the principal must have legal capacity.  Unfortunately, there are many incapacitated persons who never bothered to obtain a power of attorney before they lost capacity.   Another risk is that there may be a valid power of attorney, but the agent named may be deceased, very ill, or no longer available to serve.  Once again, there is no one with legal authority to sign the home sale agreement and the house cannot be sold even if there is a buyer.

The solution is to seek a court order for authority to sell the home.  This involves filing a lawsuit in the Superior Court for a judgment of incapacitation and award of guardianship.  The guardianship process is not a simple one. There are several different types of guardianships and the correct type must be selected.  Various court rules, required information and forms must be complied with.

The guardianship process requires doctor’s reports and an investigation into the finances and health of the alleged incapacitated person. As part of the process, the Superior Court judge appoints an independent attorney to investigate these matters and to write a report.  This attorney is referred to as the court-appointed attorney.  Often, that attorney’s report carries great weight with the court.  Testimony by the doctors may be waived, or if the guardianship is disputed, there may be an adversarial hearing.  If the evidence, any testimony and the court-appointed attorney’s report indicates that the alleged incapacitated person cannot make any significant decisions as to his person or property, then a plenary guardianship may be awarded.

But this is only the first step in obtaining court-authority to sell the home of the incapacitated person, who may urgently need the anticipated net home sale proceeds to pay for long-term care.  The next step is to file a motion with the court to sell the home through the guardianship.  The court can potentially award the requested order.  Only when such an order is in place, can the home be legally sold.

Not surprisingly, this process requires additional legal work and documentation.  The guardian must show that the proposed sale is fair and reasonable and in the “best interests” of the incapacitated person. In deciding whether this standard is satisfied, the judge may consider whether the incapacitated person will ever be able to return to the home to live there independently or with the assistance of paid caregivers, provided there are sufficient funds.  The fair market value and the tax-assessed value of the home will also be considered, as will the outcome of any prior attempts to sell the property, the cost of continued homeownership, and whether the anticipated net house sale proceeds are needed to pay for long-term care. In many cases, the home must be sold as a condition of Medicaid eligibility for the former homeowner in a nursing home.

This process takes time.   In limited cases where the safety of the alleged incapacitated person is endangered, or a very good purchase offer may be lost without swift court approval, the guardianship process can be expedited in New Jersey.

The bottom line, is that when capacity is in issue, selling the home a general durable power of attorney or a real estate power of attorney is much more efficient than through a guardianship. However, selling the home through a guardianship can be done in the difficult cases where there is no legal authority in place to sell the home.

Questions, or if you need help clearing title to sell a home through a guardianship? Let Jane know.

A Path to Financial Freedom

What if there was a simple way to finance your future long-term care?

How can you age in place at home without spending a fortune? Does that sound too good to be true? It’s not. If you are still insurable, advance planning with long-term care insurance can keep your options open.

Most of us will need a skilled nursing level of care, some for months or years. Medicare, Medigap and other health insurance plans do not pay for custodial care. These policies will only pay for limited sub-acute and skilled care for limited periods. Disability insurance is intended to replace your earned income from work if you become disabled.

What if you have a medical crisis and need 24/7 care? At a cost of over $5,000 per month at the private pay rate, even staying at home with paid care can be very expensive. https://www.genworth.com/aging-and-you/finances/cost-of-care.html.

The benefits of long-term care insurance. Long-term care insurance can help protect your family’s financial and emotional freedom and can facilitate asset protection planning.

How to you get and pay for long-term care insurance? Policies are typically purchased while the insured has attained the age of forty and before approximately age 66. With age, the risk of uninsurability increases.

Some federal and state government employers offer long-term care insurance. It may also be available through some private employers. Long-term care insurance can also be purchased through an insurance agent. Private banks also can help high net worth individuals obtain specially priced policies. Some individuals use their qualified retirement assets to pay for long-term care insurance premiums. Many policies are tax-qualified, meaning that the benefits paid under the policy may not be subject to income taxes. Some policies have special Medicaid protections. These are called “partnership policies.”

It is very important to understand what the policy will cover and how the elimination period will work. Make sure any long-term care insurance you purchase is a policy you can still afford if the premiums increase. Talk to your elder care attorney if you think you may want to lower the benefit amount or increase the waiting period before benefits are payable under the policy.

Individuals who want to plan for themselves can benefit from long-term care insurance. Dick and Jane are married and in their mid-sixties. Dick is a government employee with a long-term care insurance policy through his work. The policy pays four years of benefits after a 90-day elimination period. Dick has a serious fall and fractures requiring surgery. He goes into the hospital for surgery and contracts COVID-19 in the hospital. By the time he is ready for discharge from the hospital, he is generally deconditioned and just wants to go home.

Jane is a petite woman. She tells the hospital discharge planner that she is afraid she might hurt herself if she tries to lift Dick himself. Dick needs constant hands-on assistance to perform activities like walking, dressing, bathing, toileting, and transferring from a bed to a chair. At first, the social worker was recommending placement in a nursing home or rehabilitation for Dick, due to concern that Jane can’t care for Dick safely in the home. But after learning that there is a long-term care insurance policy, the hospital discharges Dick to the home. Once Dick satisfies the policy’s 90-day elimination period, the benefits are triggered and the benefit payments can pay for Dick’s care, relieving the financial burden on Jane. Dick and Jane do not need to spend down their assets to qualify for Medicaid, due to the long-term care insurance benefit. If they have substantial additional assets and Dick and Jane wish to do so, they can work with an elder care attorney to protect additional assets that may be at risk after the policy term is exhausted.

 Adult children who want to plan for their parent or parents can benefit from long-term care insurance. Sarah was a single mother in her early 60’s who raised four very successful adult children while working two jobs and living frugally. She is active and healthy and still working at Dunkin Donuts every day. When she retires, based on current projections, her income will limited to Social Security of about $1,500 per month, which is not enough to pay for a nice assisted living facility, if she should need some care. Her now very successful adult children purchase a policy insuring their mother, so that she can now enjoy her golden years in a comfortable community setting if she should need assisted living care. With her income and several years of long-term care insurance, if Sarah were to need a skilled level of care, she could potentially age in place in assisted living, in a very comfortable setting, and then transition to Medicaid after the facility’s private pay period is satisfied.

More information about long-term care insurance in New Jersey is available online at https://www.state.nj.us/dobi/ins_ombudsman/ltcguide.htm.

Smooth Sailing In Your Golden Years

Life is smooth sailing, until it’s not. Don’t jeopardize your independence and quality of life, or your loved ones’ freedom, by waiting for a crisis to plan your elder care and your estate.

The COVID-19 pandemic showed us the importance of being prepared. Failing to plan for death, taxes, long-term care and disability can create hardship and stress. Medicare only pays for a limited amount of long-term care under limited circumstances. Private pay long-term care can cost you and your spouse more than $13,000 per month at the private pay rate in New Jersey. At that rate, your life savings can be quickly dissipated without advance planning. Even the cost of part-time paid care at home can add up quickly. For an idea of the costs you may be facing, check out the Genworth long-term care study at https://www.genworth.com/aging-and-you/finances/cost-of-care.html.

Here are some tips that can help you remain at home as long as possible, avoid an elder care crisis and preserve a legacy for your heirs.

  • Your MVP team should include a tax and estates and elder law attorney, an accountant or enrolled agent, and a financial advisor. They can help you define your goals and the right plan to achieve them.   They can also vet others to help protect you from elder financial and other forms of abuse.
  • Execute a valid Will, a power of attorney and a health care proxy.   Work with your attorney to do this.
  • Discuss your completed estate plan with your attorney and your accountant or financial planner. Understand how your estate will be funded.   
  • Work with an elder care attorney to understand your options for long-term care.
  • Explain your wishes and preferences with your health care proxy and the person who will serve under your power of attorney.    
  • Trusts can protect your life savings, a special needs child or grandchild, and can leverage a charitable gift.  A trust can protect an inheritance from bankruptcy, divorce, disability, addiction and/or some taxes.
  • A revocable trust with a “pour over” will can provide privacy and ease of administration.
  • Periodically review your finances. Update your retirement account and insurance beneficiary designations.
  • Purchase long-term care insurance if you can qualify medically for a policy. Your financial planner can evaluate your disability, long-term care and life insurance needs.  Your elder care attorney can evaluate the policy provisions.
  • Periodically review your legal documents.  If they are outdated, or misplaced, how can they be useful?  
  • Don’t add payable on death or transfer on death designations to all your financial accounts without speaking to an attorney.   
  • Consider a prepaid burial.  Your loved ones and your funeral representative will be grateful that you did.

For questions, contact Jane at Archer Brogan – Elder Law Attorney – Trenton – Princeton – Somerville – Brick – Jamesburg

Do I Have To Pay For My Parent’s Care?

Adult children often ask, do I have to pay for my parent’s care?  That depends. If you have taken control of your parent’s assets and income, absent a provision in a durable power of attorney allowing you to gift your parent’s funds to yourself, you are generally required to use your parent’s money to pay for their care.  But what if your parent’s funds are already spent down and beyond your reach? A recent published New York case considered this question and took an interesting and pro-child approach to the subject. 

In Wedgewood Care Center, Inc., Etc. v. Kravitz, 2021 N.Y. Slip Op. 04731 (N.Y. App.Div., 2nd Dept., August 18, 2021), the New York Supreme Court Appellate Division overturned an award for a for profit nursing home, which sued the son of its former resident. The nursing home wanted to hold the son liable for his mother’s unpaid nursing home bill for the sum of approximately $49,000.  An irrevocable burial trust was funded with some of the mother’s funds.  The nursing home argued (among other points) that the resident’s son, who was named as her agent under her durable power of attorney, violated his mother’s nursing home admissions agreement by failing to use all of his mother’s money to pay for her care and by not getting his mother approved for Medicaid benefits quickly enough. 

In the trial court, the resident’s son argued that he could not be held liable for the cost of his mother’s care, as this would violate the federal Nursing Home Reform Act.  The nursing home focused on the admissions agreement, which required the son pay his mother’s nursing home bills from the assets and income of his mother within his control if he could do so without incurring any personal financial liability. The trial judge ruled for the nursing home. 

On appeal, the appellate court concluded that the funds in the irrevocable burial trust were not available to the son to pay for his mother’s care because the son was unable to withdraw this money and apply the funds to pay for his mother’s care.  With respect to the timeliness of the Medicaid award for the mother, the appeals court noted that the nursing home failed to identify any specific document that the son should have provided to the Medicaid office but failed to do so. The matter was remanded for further proceedings and should not be interpreted as a “get out of jail free” card for adult children who do not cooperate fully in the parent’s Medicaid application process.  

The bottom line is that a seasoned elder law attorney can help you understand and carry out your duties to assist in your parent’s Medicaid spend down and application and that your obligations may be more complicated than they seem at first blush. When in doubt, it is a good idea to consult an elder law attorney to explain the rights, duties and obligations incumbent upon you and your parent under a long-term care admissions agreement, the federal Nursing Home Reform Act and state law. 

Don’t File For Medicaid Too Soon!

Most people assume that they will age in place at home and never need long-term care, but statistics show that that is not the case.  Medicare may be available to pay for a limited period of care under limited circumstances, but if an individual does not have long-term care insurance, nursing home care can cost more than $12,000 per month in New Jersey.  And that is only the average monthly cost of care; many facilities charge a higher rate.  That translates to at least $144,000, which is an awful lot of money to pay out-of-pocket.  That is why many seniors who can no longer remain at home turn to Medicaid, which is a joint federal and state public benefits program, to help fund their care in a nursing home or an assisted living facility.

As part of the process of transitioning from hospital care to long-term care, you will probably be asked whether you have filed a Medicaid application. This is a routine part of the long-term care admissions process.  It is very important to avoid filing for Medicaid before it is needed, for at least two reasons. 

You cannot give away your assets and go directly on Medicaid.  Generally, any gifts made during the lookback period and not fully repaid, will be penalized. while there are a few exceptions, most uncompensated gifts made during the five year Medicaid lookback period will likely result in a Medicaid penalty period, which is the denial of payment through Medicaid for care in a nursing home or an assisted living facility for a period of time corresponding to the total of all the gifts made during the five year Medicaid lookback period.  However, Medicaid generally cannot take into account gifts made before the lookback period began. So if there is going to be gifting in large amounts, it is best for the gifts to be made before the beginning of the Medicaid lookback period. 

How do you know when the five year Medicaid lookback period is?  Actually, the term “five year” Medicaid lookback can be misleading.  Filing the first Medicaid application triggers the Medicaid lookback, which is a period of time running retroactively from the date of filing of the first Medicaid application.  For example, if Eric Early files a Medicaid application on June 1, 2021, and this is his first Medicaid application, then the lookback period will be from June 1, 2016 to June 1, 2021 (five years) and potentially continuing into the future. 

However, there are circumstances when the Medicaid lookback period can extend beyond five years.  In Eric’s case, if he withdraws his first Medicaid application and does not file another Medicaid application until January 1, 2022, the lookback period for his second Medicaid application will still run from June 1, 2016 through to June 1, 2021, but will continue thereafter until the date of filing of the second Medicaid application on January 1, 2022.  So if Eric (or his wife, if he is married) made large gifts in 2016, those gifts will be considered on his 2022 Medicaid application and will probably result in a gifting penalty which Eric could have avoided had he simply waited to file the Medicaid application.

If Eric is married, the first Medicaid application sets the “snapshot.” Medicaid looks at the assets of the husband, the wife and the assets in their joint names, totals the assets and that total is the snapshot.  The amount of the snapshot limits the amount the healthy spouse can keep.  You only get one Medicaid snapshot, so it is very important to get the highest snapshot possible.  Here is an example showing what can happen if you don’t do proper planning before filing a Medicaid application.  

For instance, if Jim was hospitalized in 2017, and the hospital social worker filed a Medicaid application for Jim thinking Jim might have to go into a nursing home, but it turns out that Jim was actually able to return to the home after all.  Jim’s Medicaid snapshot is permanently set in 2017.  His snapshot is set in stone and it is never going to change.  Suppose in 2017, Jim and his wife own a home and a joint checking account with $100,000 in 2017, the home is exempt, but the checking account is not. Jim’s snapshot is $100,000 based on the checking account balance. Jim can keep no more than $2,000 and his wife can keep $50,000 without additional planning or legal advocacy and representation. 

Suppose Jim never completed his Medicaid application in 2017 and his wife cares for him at home for another year and in 2018, re-files for Medicaid for Jim.  In 2018, she also sells the house which was jointly owned with Jim, for the sum of $150,000. If the deed to the house was left in Jim’s name, in 2018, Jim will be disqualified for Medicaid due to being over the $2,000 Medicaid resource limit, because he is entitled to half the house sale proceeds. Now Jim has to spend down an additional $75,000 that could have been saved, had the 2017 Medicaid application not been filed and had Jim and his wife consulted with an elder care attorney.  If you have questions about a Medicaid application, please feel free to contact me to discuss your unique situation.  

Questions? Let Jane know.