Elder Care Abuse: How to Know and When to Act

January 23, 2012 By Leave a Comment

Elder abuse is something that occurs in the United States more frequently than many of us know.  According to Elder Abuse Daily in 2010, there are almost 6 million elder abuse cases every year.  This estimate demonstrates a growth since the American Psychological Association reported in 1999 that an average of over 2.1 million elder abuse cases occur every year.

According to the U.S. Administration on Aging, elder abuse is the, “knowing, intentional, or negligent act by a caregiver or any other person that causes harm or a serious risk of harm to a vulnerable adult.”  The administration states that these are the common abuse types:

  1. Physical Abuse is the infliction of “physical pain or injury on a senior, e.g. slapping, bruising, or restraining by physical or chemical means.”
  2. Sexual Abuse is the “non-consensual sexual contact of any kind.”
  3. Neglect is “the failure by those responsible to provide food, shelter, health care, or protection for a vulnerable elder.”
  4. Exploitation is “the illegal taking, misuse, or concealment of funds, property, or assets of a senior for someone else’s benefit.”
  5. Emotional Abuse is the infliction of “mental pain, anguish, or distress on an elder person through verbal or nonverbal acts, e.g. humiliating, intimidating, or threatening.”
  6. Abandonment is the “desertion of a vulnerable elder by anyone who has assumed the responsibility for care or custody of that person.”

According to the National Institute of Justice (NIJ), emotional abuse, financial abuse, and neglect are the most prevalent of all elder abuses.

Unfortunately, elder abuse is not a crime commonly reported.  The National Center on Elder Abuse estimates that 83 percent of elder abuse cases never get reported.  According to a 2009 NIJ research report, the majority of the elderly’s abusers are people they know.  Through surveys, the NIJ found that the elderly are most likely to underrepresent abuses:

  • That happened more than a year ago.
  • That they did not report them to the police.
  • If the abuser was not a stranger.

Sadly, the unwillingness of the elderly to properly represent or report these abuses is detrimental; the majority of elders surveyed by the NIJ had been abused over a year ago, had not reported the abuse to police, and knew their abuser/s.

How to Protect the Elderly from Abuse

In order to protect your elderly loved one from abuse, you must:

  1. Ensure he/she is in a quality elder care program.
  2. Do research.
  3. Ask the elder care facilities that you visit for their state survey reports.
  4. Visit, inspect, and ask questions.
  5. Ensure that your chosen facility has a proper staff-resident ratio. According to the Health and Human Services (HHS), 90 percent of nursing homes are understaffed. Nursing home staffs spend less than 3 hours total with residents each day (HHS) despite about 4 hours being what the government and expert recommendation for patient care each day.
  6. Check on your loved one frequently.Visit your loved one as much as possible to ensure he/she is receiving sufficient senior care.
  7. Physically check your loved one for signs of abuse. A list of abuse symptoms can be found on the NIJ website.
  8. Know your loved one’s rights as a resident. You can view these rights on the website below or by asking your loved one’s care facility for a copy of your state’s “Resident’s Bill of Rights.”

About the Author: Amber Paley is a guest blogger and article writer specializing in elder abuse prevention. Amber spends much of her professional life writing about abuse in nursing homes.

Photo credit: pedrosimoes7

Filed Under: Assisted Living, Legal & Financial, Quality of Care Tagged With: ,

Understanding Assisted Living Residency Agreements: Part Two

January 16, 2012 By Leave a Comment

In the previous post, we defined what an assisted living residency agreement is and the key tenets of such an agreement. We also worked our way through several basic sections of a sample agreement and highlighted questions to ask and language to look for in each section.

Let’s continue walking through the sections of a sample residency agreement. For each section, we’ll provide some tips and advice on what to look for.

IX. Use of Unit
The purpose of this section is to clearly define how and for what the unit can be used. This section normally addresses issues like pets, parking, guests and storage of materials. The language in this section is usually specific, so make sure and ask questions about items you don’t see in the text.

Some common questions to ask:

  • Is parking included? If not, is there an additional fee?
  • Can your loved one have overnight guests? Are there restrictions to how many nights they can stay? Are there additional costs associated with it?
  • Are pets allowed? How many? Are there optional services available such as dog walking, grooming, etc? What are the additional fees associated with pets?
  • Can there be joint occupancy? This is particularly relevant if spouses want to live together in an assisted living community. How does this affect the cost? Is there a cost benefit to joint occupancy? How do the costs change if one resident leaves? For example, at my mother’s community, a resident’s wife spends the night several times a week, but maintains her own home down the street. How would a scenario such as this be treated under the agreement?
  • Are caregivers considered to be joint occupants? Are the fees or meal charges associated with live-in caregivers? At one local community, a monthly surcharge is assessed for caregivers, which is nearly $1,000.

XI. Termination
The termination section of the contract defines in what situations the contract may be terminated, what money is refunded after termination and what sections of the agreement continue after the end of the contract. Our sample agreement defines termination rules in a variety of scenarios, including: termination by the resident, termination by the community and termination in the event of closure.

Most communities will negotiate little on this section of the agreement, as it defines much of how their business is operated. You should still be aware the rules in each scenario so that you can plan accordingly. It never hurts to ask what can be changed negotiation, so give it a shot!

Some things to be aware of:

  • What are the resident’s termination rights? What notice is required? Thirty days is fair, but don’t let it be more than that, as you will lose your flexibility. Is there a shorter notice period in the case of death or health reasons, such as admission to a hospital or the requirement for extended skilled nursing care?
  • Ensure that you can terminate, with notice, without reason.

So what are the community’s termination rights?

  • Ensure the community can only terminate for cause rather than for any reason. Cause typically includes things like failure to pay rent, failure to meet residency requirements, intentional damage of the community, being a danger to other residents, etc.
  • In the event you are under threat of termination, attempt to negotiate a period of time to remedy the situation. Most contracts allow for thirty days to remedy contractual issues.
  • What is the appeal procedure if you feel you are being terminated or evicted unjustly?
  • The community may also terminate contracts in the event they lose their license or close. What happens in this case?

What happens when the contract is terminated?

  • How long does your loved one have to remove his or her belongings?
  • What should you expect in terms of refunds, e.g. security deposits, community fees or unused monthly fees? Depending on the amount of the community fee that was prepaid, you may be entitled to some type of refund.
  • Within how many days is the community required to issue these refunds?

Other Legal Stuff
Most contacts have several pages of standard legal language. Most of the time, these sections have no impact on the substance of your agreement. While much of this section is standard legal language, it does make sense to alert you to a few “gotchas” below:

  • Costs and attorney’s fees. If there is a provision that resident shall bear all costs and fees (including attorney’s fees) to enforce the agreement, try to remove that language. Attorney’s fees can become quite costly and these fees should be part of the community’s cost of doing business.
  • Insurance and liability. First, most communities will require the resident to maintain their own insurance to cover personal property. You’ll likely be unable to change this, but you should get insurance if it is not provided. Second, the community will likely try and disclaim all liability. You want to try and negotiate this such that the community is at least responsible where the community or its staff has acted intentionally, recklessly or with gross negligence.
  • Assigning or subletting. Most agreements will not allow you to sublet the unit to someone else. However, in the event the community does this, you may still be responsible financial. In other words, make sure you protect yourself in the event of subletting so you are not on the hook for damages, rent and other expenses. Read this section carefully.
  • Arbitration. Arbitration is a clause put into contracts so that disagreements are resolved by a third party and not in court. Arbitration can be conducted anywhere, and many companies would like to have arbitration close to their corporate offices. In the case of a residency agreement, you want to make sure the arbitration location is near your home. You don’t need to incur additional expenses should the need for arbitration arise.
  • Entire agreement. Make sure the residency agreement presented to you represents the entire agreement. You have a right to review all auxiliary materials referenced in the contract, including documents, handbooks or verbal representations.

Residency agreements are not very complex. In fact, they usually very clearly articulate what happens in what scenario and what fee will be assessed. Some key things to remember:

  • Ask questions
  • Negotiate
  • Walk away if you are not comfortable

Photo credit: Waponi

Filed Under: Assisted Living, Legal & Financial Tagged With: ,

Understanding Assisted Living Residency Agreements: Part One

January 9, 2012 By Leave a Comment

One of the most daunting tasks of a transition to assisted living is the signing of the residency agreement. Similar to a rental agreement or lease on an apartment, the residency agreement governs cost, services and termination options for your loved one’s stay in assisted living.

It always struck me as odd how little families pay attention to these agreements. We spend hours test driving cars or strolling through the mall, but oddly, very few people read these agreements in detail. And even fewer take them to an attorney for review.

What is a Residency Agreement?

If you Google search “assisted living residency agreement,” you will find many agreements from state or local agencies or assisted living communities. For the purposes of this blog, I’ll be walking through a standard residency agreement from a typical assisted living community. While many agreements may be smaller, this particular agreement is relatively thorough, easy to read and provides a great example for discussion. And with the consolidation occurring in the industry, it makes sense to start there.

Core Components of a Residency Agreement
A residency agreement has many specific sections, but they can be grouped for the sake of discussion into several topics. They are:

  • Accommodations and Term. This topic deals with the actual unit being rented and the duration of the residency agreement.
  • Fees, Core Services and Meals. This topic sets the fee schedule and identifies both included and extra costs. This topic also discusses the “what, when, where, how” of meal service.
  • Residency Qualifications. This topic discusses the qualifications required to be admitted to the community and maintain residency.
  • Maintenance and Use. This topic communicates the service levels regarding building and unit maintenance, and identifies how the rented unit is to be (and not be) used.
  • Termination, Legal Stuff and Arbitration. This topic sets how the agreement can be terminated and includes a lot of standard legal language. One important item discussed in this section it arbitration.

Always remember with contracts that many things are negotiable, so don’t hesitate to ask. This is especially true if the community has many vacancies.

Now we will look at each section of the sample agreement and provide tips, concerns, items to be aware and suggestions to negotiate. I recommend you have an attorney review any contract that is presented to you.

I. Living Accommodations
This section of the contract describes the unit and common areas to be leased by the resident. The language in this section is fairly self-explanatory. Some things to be aware of include:

  • Confirm the exact unit identified in the contract is the unit you’ve agreed to rent
  • Confirm that your loved one, his/her friends and your family have the right to use common areas. These are areas of the community that are freely available to residents, although some communities put restrictions on who other than residents can use them.

II. Term of Residency Agreement
This section of the contract defines the term of the agreement and what happens at termination. Several things are defined: the resident’s rights to ownership (there are none), the length of the agreement, and the “what do to” at termination and with personal property. Things to be aware of in this section include:

  • The length of the agreement should preferably be monthly. Be cautious of longer agreements, especially if you have no termination rights in the event your loved one is no longer able to live there.
  • No auto-renewal. In the event you agree to a term longer than monthly, ensure there is no auto-renewal clause. As you may imagine from its name, auto-renewal automatically renews the contract for a specified period of time, unless you notify in writing your desire not to renew. If the term is monthly, then auto-renewal doesn’t matter as much as you’ll only have 30 days exposure financially.
  • Limit obligations at vacancy. Whether it is due to health or death, inquire about your obligations in the event your loved one is no longer able to reside in the community. Some examples include: How long are you obligated to pay after your loved one has left? How long do you have to remove his or her belongings?
  • Reasonable notice. Ensure your loved one is provided reasonable notice before the community shows your unit to a potential resident. 24-48 hours is reasonable in most situations. Try to avoid anything that doesn’t require notice, as this can be stressful to your loved one.

These sections are fairly standard, but the above tips will help you ask the right questions and negotiate where you feel necessary.

VII. Residency Qualifications
This section is designed to protect both your loved one and the assisted living community. Why? Assisted living communities are only licensed and staffed to provide certain types of care. By defining the qualifications of residency, the community ensures they have the staff and resources to take care of your loved one. There are also requirements to protect other residents such as those requirements around contagions like tuberculosis.
Some things you should be aware of:

  • Review the minimum requirements carefully and make sure your loved one meets these requirements. It’s important to be honest with yourself, as you don’t want to be in a situation where you’ve violated the agreement within the first week.
  • Does the contract state what happens in the event your loved one ceases to meet these requirements? For example, will they be forced to move out and with what notice? Is there an appeal process to dispute whether your loved one meets the requirements? How does that process work?
  • Some communities may require the presentation of medical records or results from a recent medical exam. Make sure the contract ensures the results of the exam are kept confidential except as released by you or your loved one.
  • Some communities may require a pre-admission assessment in which a nurse and community executive conduct an interview and/or medical exam. Make sure to understand in advance the purpose of the exam and what will be covered.

Skilled Nursing Transfers
My mother came to assisted living from a skilled nursing community. In her case, the assisted living community did not conduct a pre-admission assessment. However, they did require medical records from the skilled nursing community and had a lengthy conversation with the head nurse.

In this case, you should follow up with both parties to ensure consistency of the results. The goal here is to avoid any inconsistencies during the admission process. While this part of the contract may in some cases appear intimidating, it is important to realize that it benefits both parties.

VIII. Maintenance, Repairs and Alterations
This section defines the rules to be followed regarding redecoration, alterations and basic housekeeping. It also defines to what extent the assisted living community will be responsible for maintenance and repairs, as well as the resident’s responsibility for damages.

I think most people will find this section to be reasonable and consistent with renting a house or apartment. However, you should read it closely to be sure there are no unreasonable requirements in the contract.
Some things to be aware of:

  • You and your loved one will likely want their unit to feel like home, and therefore may want to redecorate. While our sample agreement provides for things like paint and wallpaper, you should ask specifically if you intend to do something not mentioned. If the community agrees with your request, get it in writing during the contract negotiation. Similar, if you are already a resident, all redecorations should be pre-approved in writing before the project begins.
  • Similar to redecorating, should you wish to make structural or non- structural alterations to the unit, make sure you get written permission during the contract negotiation. Usually, the cost for non-structural alterations like fixtures, toilet items and shelving are the responsibility of the resident. If your loved one is handicap or disabled, the community should make reasonable efforts to accommodate their needs. In our sample agreement, this language is very vague. Make sure you articulate your loved one’s needs and get in writing the community’s intent to provide those alterations. You should also insist that these alterations are completed prior to your agreed up move-in date.
  • Most communities provide some housekeeping services and things like routine carpet cleaning. Some communities charge extra for additional housekeeping. If you intend to have an outside housekeeper visit your loved one’s unit, make sure this is allowed for in the agreement.
  • Damages are often ambiguous in many lease agreements and residency agreements are no different. Ask the community to define damages versus normal wear and tear and to give examples. Some questions to ask: Who conducts the repairs? Are costs based on actual material cost or does the resident pay for asso-ciated labor as well? How do residents resolve situations in which repair costs appear to be abnormally high? If the resident can repair the damage on their own, how much time do they have to complete the project?

Stay tuned for part two of this post next week, where we’ll continue to work our way through the sections of a sample residencey agreement.

Photo credit: Orin Zebest

Filed Under: Assisted Living, Legal & Financial Tagged With: ,

3 At-A-Glance Guides for Assisted Living

November 14, 2011 By 1 Comment

There are many details involved in choosing an assisted living facility that will work for your loved one. The process involves navigating the terminology and verbiage of health insurance policies and also figuring out what a day-in-the-life would be like at a facility.

Here are three at-a-glance guides to help illustrate what long term care insurance is, clarify key insurance terms and show what a typical day at an assisted living facility should look like.

1. Long Term Care Insurance

You may hear a lot about long term care insurance, but how do you know if it is the right choice for your family? Below we’ll outline the target market indicators for long term care insurance, to help give you a better sense if these types of policies would be a good fit for you.

Who needs long term care insurance?

  • People who have assets they want to protect
  • People who want to maintain their financial independence.
  • People who are concerned about having a choice in the quality of care they will receive in the future.
  • The average age of people who buy long- term care insurance is about 65.
  • Married people with assets of above $100,000 (not including a house).
  • Single people with assets above $ 50,000. Otherwise a client would probably deplete their assets before the insurance kicks in, making them eligible for Medicaid.
  • Since women live longer then men,they have a greater chance of ending up in a nursing home. According to a 1997 study by the Health Insurance Association of America, half of all women who live to age 65 will need a nursing home at least once during their life, compared to about one- third of men.

2. Key Health Insurance Terms

Insurance is a major factor in today’s eldercare system. I advise you to contact an insurance advisor who specializes in working with older adults and their families. Here are some basic terms you’ll need to be familiar with:

  • Medicare: A federally-funded health program administered by the Department of Health and Human Services. It is available to all Americans over the age of 65. It is made up of two parts.
  • Part A: This is available to everyone, and covers inpatient care and some aspects of in-home care.
  • Part B: This is optional and requires a monthly premium. It covers many outpatient services.
    Both Part A and B include deductibles and co- payments, and exclude certain services. You may choose to purchase Medigap insurance to cover the “gaps” in coverage by Medicare.
  • Medicaid: This is also known as Medical Assistance, and covers health care services for low-income Americans. Funded by federal, state and local governments; this program requires that applicants meet stringent income and asset requirements. While it covers some inpatient services in hospitals or certified institutions, it rarely covers in-home care.
  • Secondary Insurance: Purchased privately, these policies do not cover long-term health care costs, and rarely cover long-term in-home care. This insurance is designed to supplement Medicare.
  • Long-Term Care Insurance: Such a policy covers both in-home and residential services (including nursing homes) over an extended period of time. Often prohibitively expensive.

3.  A Typical Assisted Living Schedule

When you begin to tour assisted living communities, pay attention to the daily schedule of activities, as physical and mental stimulation will help keep your loved one happy and well.

Planned correctly, activities will become the cherished part of your loved one’s day. To set our frame of reference, let’s look at a typical assisted living day from the perspective of the resident:

  • 6:45 – 7:30am: Have breakfast and receive assistance for a shower from the aide that I’m already comfortable with
  • 7:30 – 9:00am: Make my way down to breakfast. An aide will assisted me to the dining room if necessary, and the medication technician will provide my medications for the day.
  • 9:30 – 10:30am: Morning exercises in the activity room include some stretches, leg lifts and rubber band exercises.
  • 10:30 – 11:30am: Choice of a scenic drive or reading a book by the fireplace. If I take the scenic drive, the van will be wheelchair-accessible.
  • 11:30 – 1:00pm: Lunch and return to my apartment to rest for a while.
  • 2:30 – 4:30pm: Different things happen on different days. During a week, I’ll usually see education presentation, musical performances or craft demonstrations. Nothing is required if I am tired.
  • 4:30 – 6:00pm: Dinner.
  • 6:00 – Bedtime: Evenings can bring visits from family and friends, outings in the community van, or quiet time at home.

Photo Credit: Jan Krömer

Filed Under: Assisted Living, Legal & Financial Tagged With: , , , , ,

Save Money for Elder Care! 5 Tips to Put an End to Family Mooching

October 20, 2011 By 3 Comments

no senior care lendingAs the elder (and financially stable) member of your family, you may get a lot of requests for money.  After all, your home is paid off, your kids are grown, you have fewer living expenses, and even though you’re on a fixed income, it’s not like you really need the money, right?  At least, that seems to be the mentality of your kids, grandkids, and possibly even great-grandkids.  While you’re happy to help your family when you can, you’re starting to feel like an ATM!  Besides that, the fact that you’ve paid your dues and entered retirement means that you now have the leisure time and savings needed to start the business you’ve always dreamed of or begin crossing international cities off your bucket list.  But how can you say no when your family members come looking for a handout?  Here are a few tips to stop the mooching so you can once again look forward to seeing your family.

  1. Adopt a “no loan” policy.  If you say no to one family member, you really have to say no to all of them (in order to avoid the jealousies that spring up from favoritism).  In order to avoid rifts with family members over lending to some but not to others you simply have to adopt a no-loan policy that allows you to treat everyone the same.  This will ensure that no feelings get hurt and that you’re not constantly bombarded with requests for money.
  2. Give a one-time gift.  If you feel that you do have plenty of cash on hand to loan out but you don’t want to set a precedent that makes your family think you have an open-door policy where lending is concerned, then offer a one-time gift.  This way you don’t have to worry about whether or not your loved one will pay you back and you can quickly and firmly close the door on future monetary requests.
  3. If you can’t afford it, say so.  You have your own expenses and future to worry about, with no real chance for income down the road.  You need to consider that each time someone asks you for money.  By making your position clear to family members who ask for handouts you can hopefully keep your relationships intact and ensure that your family is aware of your financial standing.
  4. Be honest.  Saying no to the ones you love can be difficult and you might be tempted to tell a little white lie in order to make yourself feel better about letting them down.  But people often see through these deceptions and then they end up feeling bad, which you obviously don’t want.  Honesty is always the best policy and you’ll find that simply telling family members up-front that you’re starting to feel used will probably result in an end to the many requests for money.
  5. Make relationships the priority.  Lending money can be a recipe for disaster where personal relationships are concerned.  Simply let family members know that you are available to listen to their problems and offer advice and moral support, but that preserving the relationship means keeping money out of the equation.

About the Author: Elizabeth Retton writes for Senior Living Atlanta where you can find assisted living in Alpharetta.

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Long-term Care And Financial Considerations

October 13, 2011 By 5 Comments

As you’ve seen, long-term care is expensive. Even a temporary stay in an assisted living facility can derail years of careful financial planning. Although costs may vary significantly depending upon where you live, a family’s assets can be quickly depleted.

According to the U.S. Department of Health and Human Services, one year of care in a nursing home (based on the 2006 national average) will cost over $62,000 for a semi-private room. One year of care at home, assuming someone needs periodic personal care help from a home health aide (the average is about three times a week), could cost almost $16,000 a year. I’ve seen folks spend close to $100,000 per year on 24-hour in-home care.

When my father died in 1989, my mom invested what he left her and did well. She thought she had planned for everything, including adjusting her expenses to be comfortable for many years. The one thing she didn’t plan for was an illness that required long-term care, where all expenses are paid privately. While she was fortunate that my father planned for her, the growing expenses continue to be a growing burden. Each year, the financial-related stress increases.

I’ve spoken to many people in similar situations. Those who don’t have the financial ability to pay for their assisted living solution, through asset allocation or long-term care insurance may find themselves forced to depend on their family to pay their bills – and that can be devastating.

It is imperative that you assess where the money can be found to implement any forthcoming decision regarding a specific assisted living location and I urge you to do so early on in the process.

What are the costs of long-term care?

And costs for long-term residential care services vary greatly depending on the type and amount of care, the provider, and in which state your loved one resides.

It is a surprise to some that ordinary health insurance policies and Medicare usually do not pay for long-term care expenses. I repeat: ordinary health insurance policies and Medicare do not pay for long-term care expenses.

Medicare pays only about 2% of all nursing facility costs, and nothing at all for residential care. Medicaid, a federal/ state health insurance program, will only pay for long-term care if the person has already spent most of their savings or other assets, and Medicaid pays nothing at all for assisted living or residential care facilities.

The average stay in a long-term care facility, according to the government findings, is about three years.

Private Long-Term Care Insurance

According to the U.S. Department of Health and Human Services (2007), at least 60 percent of people over age 65 will require some long-term care services at some point in their lives. The Department estimates that about 12 million Americans over the age of 65 will need long-term care services by the year 2020. This same study found a person may need long-term care services at any age: Forty percent of people currently receiving long-term care are adults 18 to 64 years old.

At costs ranging from $60-100,000 a year, you can easily see why Long Term Care insurance is of interest to many Americans – but as you age, it can become prohibitively expensive. According to Dianne Duva, Certified Financial Planner and Senior Financial Advisor for the JWS Group, Merrill Lynch, there’s a ‘sweet spot’ for purchasing this coverage: that optimal age where you’re not so old that such coverage is prohibitively expensive, and not so young that you’re paying needlessly for insurance you won’t use for many years.

Policy Parameters

Benefit Amounts: Policy benefits may be paid on a daily, weekly, monthly, annual or other basis. For example, a policyholder may receive $100 per day to cover their nursing home costs or $350 per week for home health care. It is important to know the average cost for nursing home care in the area before selecting a benefit amount for your loved one’s policy.

The Elimination Period: Most policies include an elimination period of 20, 30, 60, 90 or 100 days. This means that a policyholder will not receive benefits until after the elimination period has passed. Policies with longer elimination periods cost less than policies with shorter elimination periods.

The Benefit Period: This is the length of time that benefits will be received from the policy. Benefit periods can range from one year to life.

Lifetime Maximum Benefits: Most plans have a total maximum benefit paid over the length of the policy’s duration.

Inflation Protection Rider: Without inflation protection, policy benefits may be much lower than what is actually needed down the road to maintain your loved one’s standard of living.

Naturally, your loved one may not have had the opportunity to purchase such a policy. After all, we’re talking about “at-need” situations, not “pre-need.” If your loved one needs assisted living right now; paying for it has become a major issue in the present.

What’s next?

It’s time to look closely at your loved one’s assets and income. When families get together to talk about money, emotions can run rather high; it may prove useful to bring in the family attorney, accountant, or other objective third party to assist you.

You’ll quickly discover (unless your loved one has been extremely attentive to these details) that the financial and ownership records you’ll need are to be found in different places: safety deposit boxes, checking or savings accounts in different banks, stock portfolios held by different brokers; pension records, mortgage documents, deeds of trust. It’s time to get them all organized and accounted for.

Photo Credit: Images_of_Money

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Use of Trusts in Elder Law and Disability Planning

March 24, 2010 By 2 Comments

This is a guest post by Marco Chayet and Dawn Hewitt, from the law firm Chayet & Danzo, LLC in Denver, Colorado.

There are several different types of trusts that can be used to enhance the quality of life for a trust beneficiary with special needs.  These trusts generally supplement benefits that the beneficiary receives through public assistance programs, such as Supplemental Security Income (SSI) and Medicaid.  As supplemental needs trusts, or special needs trusts, there are certain items that trust funds cannot be used to pay, such as food and shelter.  The reason for this is that the beneficiary’s public assistance programs are intended to pay for food and shelter.  However, in spite of these narrow exceptions for trust distributions, the trusts can be used for a wide range of purposes.

Some examples of how funds in a properly created special needs trusts can be used are for medical treatment and medication that are not otherwise covered through Medicaid, attendant care for non-medical services, education expenses, vehicle with modifications, travel, and entertainment.  These are just a few examples.  There are literally innumerable ways that funds in the trusts can be used.

Special needs trusts are often distinguished by the manner in which they are created and funded.  Colorado’s Medicaid regulations require that any trust that is created for the benefit of a Medicaid beneficiary be submitted to the state Medicaid agency for review and approval.  The type of trust determines the provisions that it must contain to comply with Medicaid regulations and SSI criteria.  There are five trusts generally used in special needs planning.  They are (1) disability trusts, (2) pooled trusts, (3) third party discretionary trusts, (4) testamentary special needs trust, and (5) income trusts.

The following is a discussion of the aforementioned trusts used in special needs planning in Colorado.

Disability Trust

A disability trust is created for a trust beneficiary under the age of 65 who is disabled under Social Security’s criteria.  The disability trust is funded with the beneficiary’s own assets.  Some common types of assets that are used to fund a disability trust are proceeds from a personal injury settlement and an inheritance.  Assets that are held in a properly created disability trust are exempt and will not affect the beneficiary’s ability to receive Medicaid and SSI.  Federal and state law require the disability trust to be established by the beneficiary’s parent, grandparent, or legal guardian, or by a court.

A disability trust must contain certain provisions for it to be exempt for Medicaid and SSI.  Most notably, it must contain a provision to reimburse the state medical assistance program up to the amount of benefits paid for the beneficiary during the beneficiary’s lifetime.  Repayment must be made under either of the following circumstances: (1) the beneficiary no longer requires medical assistance in the state where he has been receiving benefits (i.e., the beneficiary moves to a different state, or the beneficiary no longer wishes to receive medical benefits), or (2) the beneficiary dies.

If the trust is to be funded with an annuity or other periodic payments, then the state Medicaid agency must be named as the remainder beneficiary under the contract, up to the amount of medical assistance paid on behalf of the beneficiary.

The trust can contain a provision for distributions to remote contingent beneficiaries in the event that there are funds remaining in the trust after repayment is made to the state.

The trust must contain the name and mailing address of the trustee.  It is also generally advisable to name a successor trustee in case the original trustee is unable to act for any reason, such as if the trustee resigns, becomes incapacitated, or dies.  Notice of any change in trustee must be given to the state Medicaid agency within 30 calendar days.

The trustee has sole discretion on the use of trust funds.  Therefore, it is advisable to select a trustee who knows the beneficiary’s situation and needs well and who is willing to work with the beneficiary and/or the beneficiary’s legal representative to use the trust in the beneficiary’s best interests.  Professional trustees can also be named.

The trustee should not make distributions from the trust directly to the beneficiary, such as giving cash to the beneficiary.  Nor should the trustee expend trust monies for food or shelter.  Such distributions can be seen as income to the beneficiary and could affect the beneficiary’s ongoing eligibility for benefits.

Additionally, trust monies should not be used to purchase non-exempt assets, which would also affect ongoing eligibility.

Aside from these limitations, the trust assets can be used in a wide variety of ways.  The trustee will be required to provide regular accountings of the trust to the county and state Medicaid agencies.  Therefore, it is imperative for the beneficiary’s ongoing public benefits eligibility that the trustee properly administer the trust and maintain detailed records.

Pooled Trust

A pooled trust is similar to a disability trust, in that it is funded with the beneficiary’s own assets and that it requires the trust beneficiary to be disabled under Social Security’s criteria.  The pooled trust is most commonly used for Medicaid recipients who are over the age of 65, but it can also be used by younger individuals.  The trust is established by the individual, a parent, grandparent, or legal guardian, or by the court.

The pooled trust differs from the disability trust in that it is established for many disabled individuals, instead of just one individual.  Each beneficiary has a separate account.  The accounts are pooled for investment and management purposes.  Also, the trustee of a pooled trust must be a non-profit organization, approved by the Internal Revenue Service.

Similar to the disability trust, funds remaining in the individual’s account at his death must be used to reimburse the state Medicaid agency up to the amount of medical assistance provided on the individual’s behalf, to the extent that those funds are not retained by the pooled trust.  Additionally, funds in a properly created and administered pooled trust are exempt and do not affect the individual’s ongoing eligibility for Medicaid.  The trustee has the same wide range of discretion to use trust funds for the benefit of the beneficiary.

There are special funding requirements for pooled trust beneficiaries over the age of 65.  Specifically, there must be a written care plan for the use of the funds in the pooled trust that is actuarially sound based on the individual’s life expectancy.  Absent such a care plan, Medicaid will view the transfer of funds into a pooled trust as a transfer without consideration and will impose a penalty period.  During any applicable penalty period, the individual will not be able to receive Medicaid benefits.

Third Party Discretionary Trust

A third party discretionary trust (TPDT) is different from a disability trust and a pooled trust because it is funded with assets that do not belong to the trust beneficiary.  A TPDT is commonly established by a relative of the trust beneficiary, such as a parent or grandparent, for the purpose of gifting money or property that can be used for the benefit of the beneficiary, while allowing the beneficiary to remain eligible for SSI and Medicaid.

Another difference is that a TPDT does not contain a payback provision to reimburse the state Medicaid agency for benefits provided on behalf of the beneficiary.  Also, there is no requirement that the beneficiary be disabled under Social Security’s criteria.  Finally, there are no restrictions on the beneficiary’s age.

One advantage to establishing a TPDT is that it can receive gifts of money and property from many different sources.  For example, a TPDT established by the beneficiary’s parent can receive gifts of money or property, not only from the parent, but also from the beneficiary’s grandparents or other relatives.  The TPDT can even be a beneficiary under a will.  The TPDT can continue to be funded, even after the death of the person who created it.

Another advantage of the TPDT is that it is extremely flexible and diverse in terms of funding, use, and longevity.  Further, establishing a single entity to hold property simplifies administration and allows for greater flexibility in managing property.

Testamentary Special Needs Trust

A testamentary special needs trust (TSNT) is similar to a TPDT in that it can be created by anyone under their will to hold property to be used for the benefit of the trust beneficiary upon the death of the person who created the trust.

The disadvantage to the TSNT is that it is not funded until the person who created it dies, and it can only hold assets belonging to the person who created the trust.

This trust is generally used by parents of a special needs child who want to leave their child property in a manner that will not affect the child’s eligibility for SSI and Medicaid.

A TSNT can also be used by the spouse of a disabled person who receives certain types of Medicaid benefits.  However, in the case of spouses, there are limitations on the amount of the spouse’s assets that can be used to fund the trust.

Income Trust

An income trust is necessary for an individual who requires long-term care and whose income exceeds 300% of the SSI limit.  For 2010, the 300% limit is $2,022.  Each month, the individual’s income is deposited into the income trust.  The location where the individual receives long-term care services, such as at home, in assisted living, or in a skilled nursing facility, determines how his income is used each month.

For example, if the individual receives home and community based services (HCBS) at home, he may be able to keep $2,022 of his income each month to use for his living expenses.  However, if the individual receives HCBS in an assisted living facility, or receives skilled nursing care in a nursing facility, then most of his income will be paid to the facility each month as his patient payment.  He will be allowed to keep a small amount, usually less than $100, each month for his personal needs.

There are also some allowances for the use of all or part of the individual’s income for use by his spouse if the spouse does not require care, as well as for health insurance premiums, deductibles, co-insurance, and special medical services.

Conclusion

There a several different ways of creating a special needs trust to enhance the quality of life for the trust beneficiary without jeopardizing his or her eligibility for public assistance.  The disability trust, pooled trust, third party discretionary trust, testamentary special needs trust, and income trust are the main trusts used for disability and special needs planning.  The goals for funding and use of the trust will determine which type of trust is most appropriate.  You should work closely with an elder law attorney who is experienced with these types of trusts as well as the different public benefits programs to decide which trust works best for your situation.

About the Authors: Marco Chayet is a partner, and Dawn Hewitt is an associate, in the law firm Chayet & Danzo, LLC, (303) 355-8500.  Their practice emphasizes elder law, guardianships, conservatorships, public benefits, probate, estate planning, Medicaid planning, VA planning and long-term care planning.  They can be reached online at www.ColoradoElderLaw.com or by e-mail at Marco@ColoradoElderLaw.com or Dawn@ColoradoElderLaw.com or via mail 650 S. Cherry St., Suite 710, Denver, CO 80246.

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Your Senior Health Care Bill: $260,000!

March 10, 2010 By 3 Comments

I have always been a big fan of Howard Gleckman, author of Caring for Our Parents.  In fact, he was the very first person I interviewed for my Leaders in Elder Care series.  If you aren’t familiar with Howard’s blog, you’re really missing out on a complete play-by-play of how the health care debate is impacting the cost of senior care.

This morning, he shared some startling statistics about paying for elder care that I have quoted below.  In this article, Howard has links to some fascinating studies about the out-of-pocket costs for seniors, and it is shocking.  It is mind-boggling to me how financing elder care will be solved as we move forward. He wrote:

A typical couple would have to save nearly $200,000 to pay for their out-of-pocket medical costs from the time they are 65 until they die, according to an important new study by the Center for Retirement Research at Boston College. Add in nursing home costs, and they are likely to need $260,000.

But that’s only part of the story. About 5 percent of 65-year-old couples will face catastrophic medical and long-term care costs exceeding $570,000, according to researchers Anthony Webb and Natalia Zhivan.They estimate those expenses would have exhausted the total financial assets of 85 percent of all retirees even at the peak of the stock market in 2007.

As someone who has first-hand experience with out-of-pocket expenses and my Mother’s care, I was still so stunned by these numbers, that I could not write a conclusion to this article.  What do you say?

Obviously, I encourage you to check out Howard’s writing.  In the meantime, what are your thoughts about these big numbers?

Photo: bubble dumpster

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The Irrevocable Income Only Trust

November 3, 2009 By 1 Comment

A Guest Post by Brian Mahoney, Esq.

An often discussed mechanism in Medicaid/Nursing Home planning is the IIOT, an Irrevocable Income Only Trust.

Aside from Nursing Home issues and look back periods we need to first ask about financing issues. Consider whether the Trustee might ever need to obtain financing on the realty, perhaps for a new burner or roof. Most Lenders will not mortgage realty owned by any irrevocable Trust. Would deeding realty into an IIOT make a pre-existing mortgage due and payable?

If the sale of realty after it is deeded into the IIOT is a possibility we can structure the IIOT as a Grantor Trust. If an Elder Trustmaker later moves into Assisted Living or into a Nursing facility, there is no spouse at home and that realty is sold by the Trust we want the Trustmaker to be able to elect the $250K capital gain exclusion.

To that end I insert a testamentary power of appointment allowing the Trustmaker to appoint Trust property by Will to a class of persons described in the IIOT. I do not include a lifetime power to appoint because it may be considered too much power in the skeptical eye of a Medicaid caseworker especially in this era of recession. Their position might be this would render the IIOT a “Medicaid qualifying trust.” It can be overcome but do we want to go into the trial Court to refute their arguments?

The Trustmaker should have no power to appoint trust principal to himself, his creditors, his estate or his estate’s creditors. The ultimate goal of an IIOT is for Trust owned assets to be non-countable and the less the IIOT contains for “escape mechanisms,” the more certain our objective becomes.

We do provide an “escape hatch,” in the IIOT in case the look back period is not met to avoid the worst of both worlds, i.e., principal that is “countable,” for Medicaid purposes, but which cannot be accessed by the Trustmaker. Provide for appointment of a Trust Protector who could be a corporate fiduciary, Attorney, C. P. A. or an individual who is not related or subordinate to a transferor or any Beneficiary within the meaning of Section 672(c) of the Internal Revenue Code.

The IIOT may provide that during the Trustmaker’s lifetime the Trust Protector may in writing, direct the Trustee to pay to or apply for the benefit of the children or grandchildren of the Trustmaker or their spouses, so much of trust principal as the Trust Protector in its sole discretion deems advisable.

To preserve Grantor Trust status then, along with the testamentary POA and “Trust Protector escape hatch,” we need to add a so-called Designating Person who can add a class of Beneficiaries. The class might consist of: children, grandchildren, spouses, or charities. The Trustmaker, the Trust Protector, any Beneficiary of the IIOT (including any person who may be added as a Beneficiary) any so-called “adverse party,” as defined in Section 672(a) of the Code, or any so-called “related or subordinate party,” as defined in Sect. 672(c) of the Code should not be appointed to serve as a Designating Person.

Can the Trustmaker(s) be Trustee? There appears to be no express prohibition against that, but with the current government deficits and budget cuts, why risk a higher level of scrutiny. If we have decent prospects as Trustee it may be safer to not have the Trustmaker in the position of power as a Trustee.

We all know the number of potential Adult Child/Trustee pitfalls that can develop. Will the existence of the Trustmaker’s testamentary POA be enough to keep an Adult Child/Trustee in line if he can be “disinherited,” from the very Trust that Child administers?

Include a provision allowing the Trustmaker to remove any Trust Protector or Trustee with or without cause at any time to allow the Trustmaker some much needed control in the event a relationship with a fiduciary sours in the future. Is that too much power for Medicaid? Can a Client afford not to have such removal powers?

Many practitioners are now acting as Trustees or Trust Protectors for their Clients’ IIOT’s knowing they’ll never act in a manner contrary to the Trustmaker’s best interests.

About the Author: Brian F. Mahoney is an estate planning and elder law attorney in Canton, MA.  He has been practicing for 26 years, and can be reached at www.attybrianmahoney.com.

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