GeriLaw | Robert Fleming, Tucson elder law attorney, and colleagues

LONG-DISTANCE CAREGIVERS RECEIVE HELP

Living in a different city or state, miles from aging parents, can be difficult. Keeping in touch by telephone and making long trips to help parents or aging relatives with their needs can be time-consuming and not nearly as effective as being available full-time in person.

 

According to a report by the Alzheimer's Association of Los Angeles and Riverside, California, there are approximately 3.3 million long-distance caregivers in this country with an average distance of 480 miles from the people they assist. The report also states that 15 million days are missed from work each year because of long distance care giving. Seven million Americans provide 80% of the care to ailing family members, and the number of long-distance caregivers will double over the next 15 years.

The long-distance caregiver is a new role that is thrust upon children and younger family members. Families used to live closer together, with children residing and working near their parents. But nowadays family members are more distant from each other. Society, today, is recognizing this. Some caregiver services have tweaked their programs to work as liaisons between long-distance caregivers, senior loved ones, and local medical professionals.

 

Professional care managers, also known as geriatric care managers, elder care managers or aging care managers, represent a growing trend to help full time, employed family caregivers provide care for loved ones. Care managers are expert in assisting caregivers, friends or family members find government-paid and private resources to help with long-term care decisions.

 

They are professionals who are trained to evaluate and recommend care for the aged. A care manager might be a nurse, social worker, psychologist, or gerontologist who specializes in assessing the abilities and needs of the elderly. Care manger professionals are also becoming extremely popular as the caretaker liaison between long-distance family members and their aging loved ones.

 

The most important thing is to find a geriatric care manager where your loved one lives. This geriatric care manager will have knowledge of all the services in the area and can be your eyes and ears.

 

The following is a partial list of what a care manager or geriatric care manager might do:

• Assess the level and type of care needed and develop a care plan.
• Take steps to start the care plan and keep it functioning.
• Make sure care is in a safe and disability friendly environment.
• Resolve family conflicts and other issues with long-term care.
• Become an advocate for the care recipient and the caregiver.
• Manage care for a loved one for out-of-town families.
• Conduct ongoing assessments to implement changes in care.
• Oversee and direct care provided at home.
• Coordinate the efforts of key support systems.
• Provide personal counseling.
• Arrange for services of legal and financial advisors.
• Provide placement in assisted living facilities or nursing homes.
• Monitor the care received in a nursing home or in assisted living.
• Assist with the monitoring of medications.
• Find appropriate solutions to avoid a crisis.
• Coordinate medical appointments and medical information.
• Provide transportation to medical appointments.
• Assist families in positive decision making.
• Develop care plans for older loved ones not now needing care.

 Services offered will depend on the educational and professional background of the care manager, but most are qualified to cover items in the list above or can recommend a professional who can. Fees may vary. There is often an initial consultation fee that is followed by hourly fees for services. Health insurance usually does not cover these fees, but long-term care insurance might.

 

When you take into account the time absent from work and time to find the right care resources for your loved ones, along with the cost of travel expenses to monitor their care, you will probably concur that using a caregiver is money well spent. Add to this the stress of handling your own life circumstances combined with being a caregiver, and you will probably wonder how you could have ever done without the care manager.

 

Andrew Hook

Oast & Hook

www.oasthook.com

 

Is a Guardian Personally Liable for Nursing Home Costs of Ward?

That is the question posed (on narrow facts) in this week's Elder Law Issues article at elder-law.com. The answer in that case -- and probably in most cases raising similar questions -- turned on the language of the admission contract itself.

To start with the result: in Five Star Quality Care v. Lawson, the case described in Elder Law Issues, the Missouri Court of Appeals ruled that the Public Administrator, Bonnie Sue Lawson, would not be personally liable for her ward's nursing home bills. The reason the issue even arose: it took Ms. Lawson over a year to figure out that she would need to get appointed as conservator of her ward's estate (she was already guardian of the person) in order to liquidate two small life insurance policies to get her ward's assets below the eligibility limit. During that time the nursing home incurred over $15,000 of unpaid bills caring for the ward.

The reason Ms. Lawson was not liable turned on the language of the admissions agreement. A general term of the contract (it was in fact included under the heading "General Provisions") required Ms. Lawson to use "due care." Elsewhere, however, the contract dealt specifically with what would happen if a Medicaid application was denied: the agreement required Ms. Lawson to pay all the nursing home costs, but limited that payment to being made "from the Resident's assets."

More generally, a guardian or conservator who signs a nursing home agreement should not be personally liable for the nursing home costs. That result could be different, in particular facts, if:

    1. The signer owed an obligation of support to the nursing home resident that would make the signer liable whether or not they signed the contract (most often this argument will come up when a spouse is institutionalized).

    2. The admissions document clearly indicates that the signer is assuming personal responsibility. The best way to avoid this result is, of course, to read the document before signing. It also helps to sign "as guardian" (or "as conservator" or "as agent under a power of attorney" or whatever fiduciary relationship the signer may have). In fact, it might be even better to sign "as guardian only, and not individually" (with appropriate adjustments for the actual fiduciary relationship, of course). Remember, though, that even if the signer foolishly accepts individual responsibility, that may not be the final word on the subject. There is likely still an argument to be made that the signer received nothing in return for his or her acceptance of the liability.

    3. The fiduciary commits fraud, or breaches his or her fiduciary duty. It is likely that a fiduciary breach would need to be fairly egregious before the fiduciary would be personally liable for the resident's nursing home expenses -- but it is not difficult to image a scenario in which a conservator (or an agent under a power of attorney) might take all the ward's money improperly and leave the nursing home without any source of payment.

The bottom line: read the nursing home admission agreement before signing it. Have it reviewed by an attorney if you are unsure of what you are agreeing to do. Do not sign without clearly indicating your fiduciary relationship.

Robert B. Fleming
Fleming & Curti, PLC
Tucson, Arizona
www.elder-law.com

Nursing Homes for Veterans

Nursing Home Coverage through the VA Health Care System

Nursing home coverage along with other long-term care services, such as home care, and assisted living as well as geriatric care management are available through the Veterans Health Administration for qualifying veterans.

In order to get into the veterans healthcare program, the veteran must have service-connected disabilities, or be below a qualifying income level, or be receiving Veterans Pension income. Once in the system, a veteran is are not guaranteed long-term care services, including nursing home care, unless the veteran meets specific requirements. Here is a list of these requirements for nursing home coverage.

Who is Eligible for Nursing Home Care?

• Any veteran who has a service-connected disability rating of 70% or more;
• A veteran who is rated 60% service-connected and is unemployable or has an official rating of “permanent and total disabled;”
• A veteran with combined disability ratings of 70% or more;
• A veteran whose service-connected disability is clinically determined to require nursing home care;
• Nonservice-connected veterans and those officially referred to as “zero percent, noncompensable, service-connected” veterans who require nursing home care for any nonservice-connected disability and who meet income and asset criteria; or
• If space and resources are available, other veterans on a case-by-case basis with priority given to service-connected veterans and those who need care for post-acute rehabilitation, respite, hospice, geriatric evaluation and management, or spinal cord injury.

VA's nursing home health system programs include VA-operated nursing home care units and contract community nursing homes. Many VA hospitals operate nursing home care units located in or near the hospital. Other hospitals, without adequate nursing home beds, contract with approximately 2,500 community private nursing homes nationwide to provide services.

Andrew H. Hook
Oast & Hook
www.oasthook.com

Irrevocable Income Only Trusts

Due to the high costs associated with long-term care, it is critical for many individuals to qualify for Medicaid assistance. The major concern for most individuals who anticipate future long-term care expenses is how to qualify for Medicaid.  While there are various planning strategies used to qualify for Medicaid long-term care assistance, transferring assets into an Irrevocable Income Only Trust (“IIOT”, “trust”) is becoming increasingly popular. The purposes of the IIOT are (1) to provide a source of income, (2) to protect and manage assets, (3) to preserve Medicaid eligibility, and (4) to avoid the costs and time associated with probate.

IIOTs allow individuals to transfer their assets into a trust as protection in lieu of making outright transfers to their children.  Under the terms of an IIOT, the transferor (“grantor”) will receive all of the income produced by the assets in the trust for the grantor’s lifetime.  By transferring assets into an IIOT, the grantor will still reserve some control and retain some interest in the transferred assets – advantages that are not available when transfers are made outright to individuals.  If the grantor places the grantor’s home into the trust, then the trust agreement can specifically provide for the grantor to continue to reside in the home for the grantor’s lifetime.  Because IIOTs are irrevocable, the grantor cannot revoke the trust and reacquire the assets; therefore, the assets are not available for Medicaid eligibility purposes. 

IIOTs are commonly used to permit Medicaid to pay for the high cost of long-term care, once the Medicaid look-back period has passed.  The look-back period, which is currently set at five years, is the period prior to the Medicaid application during which Medicaid will penalize an applicant for transfers within such period.  Assets transferred into a trust more than five years prior to the filing of a Medicaid application will not impact Medicaid eligibility. If a penalty is imposed because of a transfer to an individual or a trust within five years of a Medicaid application, the period of ineligibility begins when the individual enters a nursing home and is otherwise eligible for Medicaid. 

IIOTs also offer tax advantages.  The grantor is treated as the owner of the trust for income tax purposes.  This is valuable because the trust’s income tax rates are usually higher than the grantor’s income tax rates.  Additionally, the IIOT can be drafted to include a special power of appointment for the limited purpose of including the trust assets in the grantor’s “estate” for estate tax purposes. A special power of appointment will also permit a grantor to change his or her beneficiaries.  Upon the grantor’s death, the trust assets obtain a “step-up” in value. This means that when the assets are distributed to the grantor’s chosen beneficiaries, the beneficiaries’ bases in the assets for income tax purposes will be the value of the assets as of the grantor’s date of death. As a result, the beneficiaries will avoid any capital gains taxes on the appreciation of the trust assets between the date of acquisition and the grantor’s death if the property is sold after the grantor’s death.

Andrew Hook
Oast & Hook
www.oasthook.com

Medicare Part B Premiums Remain the Same in 2009

The Medicare Part B premium for most beneficiaries will remain at $96.40 per month for 2009.  This is the first time since 2000 that the premium is not increasing, and this is only the fifth time since 1976 that the premium has been frozen.  Individuals earning more than $85,000 and couples earning more than $170,000 will still pay premiums based on their income, with the premiums ranging from $134.90 to $303.30 per month.  The deductible for Part B will also remain steady at $135.

Normally, premiums go up each year because costs and demand for care projected for the coming year are expected to rise.  These costs will likely rise next year, but these costs will likely be offset because of an adequate reserve in the Medicare Part B trust fund.  The reserve gained $9.3 billion this year after officials realized that money for hospice costs had been inadvertently drawn from Medicare Part B instead from Medicare Part A.  Healthcare costs usually rise more quickly than inflation, so the premium freeze may not last past 2009.

Medicare Part B covers a portion of the cost for visits to physicians, other outpatient care, durable medical equipment (like wheelchairs and oxygen machines), some home health services, certain outpatient therapies, and drugs that cannot be administered by patients at home and are thus administered by physicians in their offices.  Medicare Part A covers hospital and limited nursing home care.  Most beneficiaries do not pay a monthly charge for that coverage, but next year they will pay a $1,068 deductible when admitted to a hospital; this is a $44 increase from the current deductible.  Medicare projects that it will spend $245.5 billion on hospital, skilled nursing, hospice and some home health services, and $194.3 billion on Part B services.

Low-income Medicare beneficiaries can receive assistance with the Medicare Part B premium costs, as well as the deductibles and co-payments.  These beneficiaries are called “dual eligibles” because they are eligible for Medicare, and they are also eligible for Medicaid due to their low income.  For Qualified Medicare Beneficiaries (QMBs), Medicaid will pay the Medicare Part B premium, deductibles, and co-payments.  For Specified Low-Income Medicare Beneficiaries (SLMBs), Medicaid will pay the Part B premium.  These dual eligible beneficiaries can also receive assistance with the Medicare Part D prescription drug benefit costs.

Andrew H. Hook
Oast & Hook
www.oasthook.com

Assisted Living Facility Costs as Tax Deductions

A recent NAELA News article by Robert Anderson discusses the process for deducting assisted living facility (ALF) costs on federal individual income tax returns.  Internal Revenue Code (IRC) § 7702B provides rules for deducting certain qualified long-term care costs as medical expenses.  Normally, the costs of nursing home care should be deductible, but the status of ALF costs has not been as clear.

For ALF residents, qualified long-term care costs are “necessary rehabilitative services, maintenance or personal care services that are (1) required by a chronically ill individual, and (2) provided pursuant to a plan of care by a licensed health care practitioner.”  The ALF resident must first qualify as a chronically ill individual.  The resident can meet this definition if within the previous 12 months, a licensed healthcare practitioner certifies that the resident meets one of two descriptions pursuant to IRC § 7702B(c)(2):

1. The resident is unable to perform at least two activities of daily living (ADLs) without substantial assistance from another individual for at least 90 days due to a loss of functional capacity.  ADLs are eating, toileting, transferring, bathing, dressing, and continence.

2. The resident requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.

Maintenance or personal care services provide assistance for a chronically ill individual with his or her disabilities; therefore, if an ALF resident needs help with two ADLs, then the assistance provided by the ALF qualifies as personal care services.  Likewise, if the ALF protects the individual from safety and health threats due to severe cognitive impairments, then the assistance provided by the ALF qualifies as personal care services.  The certification of the chronic illness requirement must be done within the preceding 12 months.  The certifying licensed care practitioner can be any physician, registered professional nurse, or licensed social worker, and this practitioner does not have to be an employee of the ALF, although this practitioner could be.  The licensed care practitioner must personally examine the resident and provide a written opinion.  The opinion should be obtained prior to admission to the ALF.

The plan of care is not defined within the Internal Revenue Code.  Federal statutes require that nursing facilities have a written plan of care for each resident.  Although written care plans for ALFs are not required by federal statutes, most ALFs prepare them.  The plan of care must be prepared by a licensed care practitioner, and it should be prepared at or as soon after admission to the ALF as possible.

If these requirements are satisfied, then 100% of the costs of the ALF (including room and board) are deductible on the resident’s 1040, Schedule A, to the extent that the costs are not reimbursed by government benefits or insurance.  Under IRC § 213 (a), the resident can claim an itemized deduction for unreimbursed medical expenses to the extent that such expenses exceed 7.5% of adjusted gross income.  These expenses include the qualified long-term care expenses, as well as insurance premiums and other eligible medical expenses. 

If the resident does not meet the requirements of IRC § 7702B, then the resident can still deduct the percentage of the ALF costs attributed to nursing services, pursuant to IRC § 213.  The room and board and personal services costs would not be deductible.  The ALF should provide an estimate of the deductible portion of its costs, and the taxpayer can attach the statement to the Schedule A.  Typically 30% to 40% of the ALF costs are for nursing services.

Andrew H. Hook
Oast & Hook
www.oasthook.com

Veterans' Benefit for Home and Assisted Living Care

One little-known benefit for veterans and their families is the Aid and Attendance (A&A) benefit.  This benefit can be used for care in an assisted living facility or for care at home.

Title 38 of the U.S. Code contains statutes regulating veterans' benefit programs.  Many of our readers are probably familiar with service-connected Veterans’ Compensation.  This compensation is provided to veterans for disabilities caused or exacerbated by military service, and it is normally expressed as compensation for a certain percentage disability.

Non-service connected benefits (pensions) are available to veterans (and some widows or widowers) who meet certain conditions.  The veterans do not have to be retired from military service, but the program is needs-based.  The veteran must have served 90 days on active duty (the requirement is longer for more recent veterans), with at least one day during wartime, and have received a discharge under conditions other than dishonorable.  The veteran must be “permanently and totally disabled” because of a non-service connected condition, or be over the age of 65 years.  Additionally, for the improved pension program, the veteran's income cannot exceed $931 per month (with no dependents) or $1,220 per month (with one dependent), the current maximum annual pension rate (MAPR). 

The A&A benefit is an increased benefit for veterans who require “care or assistance on a regular basis” to protect them from dangers in their daily living environment.  Veterans living in assisted living facilities are presumed to need this level of assistance, but the veteran should include a letter from the veteran’s personal physician regarding the veteran’s disability.  The need for A&A increases the income limit from $931 per month to $1,554 per month (with no dependents), and from $1,220 per month to $1,842 per month (with one dependent).  The MAPR for the A&A benefit, therefore, is the higher of $1,554 or $1,842 per month.  (Widows or widowers can receive a maximum of $998 per month.)  One significant feature of the pension program is that income is reduced by paid but unreimbursed medical expenses, including insurance premiums, Medicare premiums, prescriptions, dental and vision care, and the costs of an assisted living facility, in-home aid, or adult day care.  In many cases, these costs can easily reduce the applicant's income to a level that would permit the applicant to receive the benefit.  The net worth of the applicant is also considered in the evaluation for A&A; there are no hard and fast rules, but a net worth below $80,000 for a couple, or $50,000 for an individual, has been acceptable.  The VA looks to the net worth at the time of the application; there is no penalty period for the transfer of assets.  If the veteran, however, transferred property that produced a great deal of income on the previous year’s tax return, that previous year’s higher income would be reflected on the application and may affect eligibility.  Further, because the lack of a penalty for transferring asset conflicts with Medicaid requirements, elder law attorneys should advise their clients of this disconnect and plan accordingly.  The A&A benefit payments are made directly to the veteran or eligible surviving spouse, and they are specifically excluded from the definition of income for Medicaid purposes.  The benefit is reduced to $90 per month if the veteran lives in a nursing home.

Andrew Hook
Oast & Hook
www.oasthook.com

Structured Settlements and the Deficit Reduction Act of 2005

I was recently interviewed for an article in The Structured Settlements Report.  The article considered the impact of the Deficit Reduction Act of 2005 (DRA) on structured settlement annuities for persons receiving needs-based benefits such as Medicaid and Supplemental Security Income (SSI).

Structured settlement annuity brokers could cause problems for their clients if the brokers are not careful in writing these annuities because the clients could lose their eligibility for needs-based government benefits.  The structured settlements should be set up with special needs trusts or Medicare set-asides, which, if created properly, are exempt for Medicaid and SSI eligibility purposes.

The DRA requires that the state be named as the primary beneficiary of an annuity unless the applicant has a spouse, or a minor or disabled child.  The Center for Medicare and Medicaid Services (CMS) permits each state to write its own interpretation on how this DRA provision applies to Medicaid eligibility in the state.  As a result, states may vary on their interpretations and applications of the DRA.  What has pretty much come down from CMS is they are not going to get involved with how a state interprets federal laws.  It gives flexibility in the interpretation by rewriting the eligibility.  What we are beginning to see, however, is that the states are going in all different directions.  This is something that could create a lot of problems.  The potential is for states to restrict the eligibility to qualify for Medicaid.  Some states have already done so by lengthening the review period for qualification from three years to five, and by creating a new period of ineligibility for each new annuity.  Structured settlement annuitants who have not listed the state as the primary beneficiary could end up being ineligible for Medicaid.

I also recommended that structured settlement annuity brokers consult with special needs planning attorneys.  We are trying to work with the structured settlement people to be brought in at an earlier point in the settlement process.  We are experts at what is available. [Special needs plaintiffs] need, typically, a larger reserve fund. [The] issue sometimes comes up after a settlement is entirely structured, and the claimant asks, ‘How am I going to get my house?’  There was no lump sum.  It’s much better to get in early.  You can discuss everything, make plans.  SNA member Bernard Krooks agrees, “It is critical that a structured settlement be placed into a special needs trust or else the claimant could be denied Medicaid.  The personal injury bar is not educated about this.  We are trying to educate personal injury attorneys and structured settlement brokers.” 

Andrew Hook
Oast & Hook
www.oasthook.com

Negative Inheritance

A recent column in Conde Nast’s Portfolio.com addressed the concept of “negative inheritance.”  Economists use this term to describe the situation where any gifts or bequests that children otherwise might receive from their aging parents are outstripped by the costs to the children for caring for their parents.  Negative inheritances can destroy a child’s retirement and financial plans.  For example, if a child had planned to withdraw a small percentage from his or her portfolio each year to support the child’s lifestyle, but now must increase that percentage by fifty percent to take care of aging parents, then the child’s financial plan won’t work.  As a result, financial advisors have developed detailed strategies for dealing with these risks.  These strategies include family dialogue, long-term care insurance, and active management of the parents’ assets.

The most critical element in avoiding negative inheritances is proactive family discussion.  The family dynamics may be difficult, but if the family does not discuss possible scenarios in advance, then the caregiving inevitably falls to one child.  This can cause tension and resentment and can damage the family.  If the children to whom this responsibility will fall are reluctant to bring up the subject with their siblings, then they may want to start by discussing what will happen when the parents can no longer drive.

Financial advisers and elder law attorneys often ask their clients for permission to talk with their aging parents to review the status of their assets, and to determine what plans the parents may have in place for their long-term care.  The financial advisor can then run a series of projections to see if the parents’ assets will be sufficient for their care.  If the funds will not be sufficient, then purchasing long-term care insurance might be an answer, even if the children pay the premiums.  Purchasing a policy that covers half the cost of in-home, assisted living, or nursing home care is better than having no insurance at all.

If the parents cannot qualify for long-term care insurance because of their age or medical conditions, then it is essential to actively manage the parents’ assets.  This may include dealing with the family home; often people are house-rich and cash-poor.  Obviously, selling the family home in order to provide funds for care, or to diversify assets can be stressful for all concerned.  Sometimes, however, it can be the inevitable option.

Studies show that middle-aged caregivers can suffer emotionally and vocationally, as well as financially.  Some baby boomers will work at paying jobs in retirement so they can care for their parents.  The caregiving workload can increase from an average of five hours per week to forty hours per week when the parent suffers from Alzheimer’s disease or severe dementia.  The caregiver has less time to spend with peers and operates on much less sleep.  This emotional toll does not appear on a balance sheet, but it is real.

Andrew Hook
Oast & Hook
www.oasthook.com

Annuities and Long-term Care Planning

A recent Pennsylvania Commonwealth Court case provides some insight on the use of annuities in long-term care planning.  In Ross and Ross v. Department of Public Welfare (No. 137 C.D. 2007), the wife entered a nursing home on February 5, 2003.  On April 8, 2005, her husband transferred $418,026.66 into a single premium immediate annuity.  The annuity contract pays the husband $10,211.83 per month from May 15, 2005 to September 15, 2008.  The husband established the annuity in order to qualify his wife for Medicaid Assistance-Nursing Home Care (MA-NHC) benefits (equivalent to Virginia Medicaid) and to pass assets to his children.  The husband is the sole owner of the annuity, and his three children are the sole beneficiaries.  The wife has no interest in the annuity, and, after the annuity purchase, she had no funds to pay the nursing home.  The payment for the annuity is irrevocable, and the husband cannot terminate the annuity, but he can change the beneficiaries or sell his right to the income stream.

The husband filed an MA-NHC application, and the county assistance office determined that the annuity was an available resource with a value of $202,364.00.  The husband filed an appeal on behalf of his wife, and the Administrative Law Judge (ALJ) denied the appeal.  The ALJ determined that: (1) the language of the annuity did not interfere with the husband’s ability to sell his right to the income stream, thereby converting the annuity into immediate cash; (2) the present value of the income stream exceeds the resource limit; and (3) the annuity was purchased not only for the benefit of the husband and wife, but also as a way to pass assets to the children and qualify the wife for MA-NHC benefits. On further appeal, the Department of Public Welfare (DPW) affirmed the ALJ’s decision.  The husband and wife petitioned the court for review, claiming that the DPW erred in concluding that the income stream from the annuity is an available resource for the wife’s eligibility for MA-NHC benefits.  The court agreed and reversed the DPW order.

The court stated that under 42 U.S.C. §1396r-5, income and resources are treated differently, and that “no income of the community spouse shall be deemed available to the institutionalized spouse.”  Therefore, “[t]he community spouse’s income does not affect the determination [of] whether the institutionalized spouse qualifies for Medicaid.”  The court said that if the payment of income is made solely in the name of the community spouse, the income is income only to that spouse.  In this case, the payment of the income from the annuity is made solely in the husband’s name, the income is considered income only to the husband, and none of the income is deemed available to the wife.  The DPW treated the husband’s income as an available resource, but the court cited an opinion by the Superior Court of New Jersey for the proposition that “treating the market value of an income stream paid to a community spouse ‘blurs the distinction between resource allocation and income allocation’ under the federal law.”  The court concluded that DPW “improperly considered [the husband’s] income stream from an irrevocable and non-assignable annuity as an available resource based on the existence of a secondary market for such income streams.”

Andrew H. Hook
Oast & Hook
www.oasthook.com
Offices in Virginia Beach, Virginia and Portsmouth, Virginia