Elder Law

Two Truths About Growing Older & The Role of Elder Law

• People are living longer.
• Just when life should be simple, aging is complex - due to complicated rules and decisions about the future,

Elder Law assists older adults and their family members at a time when many will be called upon to make important life decisions. Our goal is to give seniors and their families what they want most - the security and peace of mind they deserve.

ESTATE AND MEDICAID PLANNING EVALUATIONS:

Demo firms, representation begins with a comprehensive estate and long-term care planning evaluation, which indicates the best strategies to meet estate planning and long-term health care needs. All aspects of the client's financial well-being are examined. A follow-up letter is issued summarizing the client's situation, reviewing the law, and explaining recommendations for the client. Because Medicaid has taken on an increasingly important role, a working knowledge of Elder Law is critical for a comprehensive evaluation and plan.

GUARDIANSHIP SERVICES

We represent clients seeking guardianship of relatives who can no longer manage personal or financial affairs. We assist Guardians in fulfilling their Guardianship duties. Our team, consisting of an attorney and staff, a bookkeeper, along with an on-call social worker, provides comprehensive monitoring of the ward's medical, emotional, legal, and financial needs.

ESTATE/FIDUCIARY ADMINISTRATION

Demo Law Firm, provides full representation to fiduciaries administering estates/trusts, whether large or small. Probate administration includes filing the petition for appointment of the personal representative, preparing and filing the inventory of estate assets, paying decedent's debts, distributing assets, filing tax returns, and accounting to the Probate Court.

MEDICARE AND MEDICAID ADVOCACY

We prepare and assist in preparation and submission of the Medicaid application. At the client's request, we handle all communications with the government, thereby removing the individual as much as possible from the tedious and often frustrating application process. In addition, we represent clients in connection with Medicaid and Medicare appeals and before the applicable courts.

PLANNING FOR PEOPLE WITH DISABILITIES

We assist clients with disabilities in planning for their long-term needs. Demo Firm also advises the parents or other family members of disabled persons on how they can effectively provide for them, while preserving eligibility for Medicaid and other public entitlements. We provide information about planning options, drafts supplemental needs trusts and other documents as appropriate, and advises trustees of trusts for the benefit of disabled persons concerning trust administration.

Selected ELDER LAW Issues

Institutional Care Program - Medicaid (Texas)

Benefit: Nursing home care.

Eligibility: For the aged (over 65), blind, or disabled individuals. Determination of medical need is required.

Income Cap: Monthly income for the person who will be institutionalized cannot exceed a cap of $1,656 (Jan. 2003). If income exceeds this amount, a qualified income trust will be required (see below).

Resources: In order to receive Medicaid a person in a nursing home may have resources of not more than $2,000 in countable assets. Certain assets do not count. Exclusions from the resource limitation include the home, an automobile, most household goods and personal effects, cash surrender value of life insurance (if the face amount does not exceed $2,500), burial plot, and prepaid funeral expenses (if irrevocable). The home is excluded if a spouse is living in the home, or if the individual intends to return to home.

Spouse Income and Resources: The non-institutionalized spouse's (community spouse) income and resources are also subject to by rules governing Medicaid.

Determination of Income: Income paid solely to one spouse belongs to that spouse. Income paid in both names is considered half-available to each spouse. Income paid in the name of either or both spouses and another person is considered available to each payee in equal shares.
Determination of Countable Resources: The community spouse may have $90,660 (2003) of countable resources. This is adjusted annually for cost of living. The home, automobile and most household goods and personal effects are excluded from the calculation.
Community Spouse Monthly Income Allowance: The community spouse may receive an income allowance from the institutionalized spouse's income to bring the community spouse's monthly income up to a minimum of $1,493 (for 2003), after including his or her own income. A community spouse with high housing costs may be able to keep even more of the institutional spouse's income up to maximum of $2,267 (2003).

Effect of Transfers of Assets (Gifts) on Eligibility: In order to meet Medicaid resource limits people have sometimes given assets away. Specific rules govern such transfers.

Before October 1, 1993: Prior to the Omnibus Budget Reconciliation Act (OBRA; effective for transfers before October 1, 1993), asset transfers were handled as follows: at the time of the Medicaid application, it was determined whether the institutionalized individual (or spouse) had disposed of resources for less than fair market value within the preceding 30 months. If so, a period of ineligibility was imposed, beginning with the month in which the resources were transferred. The period of ineligibility equaled the total uncompensated value divided by the average cost of nursing home care to a private patient in Texas (then $2,400 per month). Thus, if $24,000 was given away, for 10 months after the date of the transfer the applicant would be ineligible. The maximum penalty period was 30 months. Transfers between spouses were not penalized.

After OBRA: Transfers made on or after October 1, 1993 are subject to new rules, containing a trap for the unwary. The new rules distinguish between outright transfers and transfers made from a trust. There is no maximum on the penalty period as before.

Outright Transfers: At the time of application, it is determined whether the institutionalized individual (or spouse) disposed of resources in the preceding 36 months (lookback period) for less than fair market value. If so, ineligibility is established beginning with the month of the transfer. The time of ineligibility equals the total uncompensated value at the time of transfer divided by the average cost of nursing home care to a private patient (now $3,300 per month in Texas). Unlike the old law, there is no maximum ineligibility period. Transfers between spouses are still not penalized.

Transfers to and from Trusts: The penalty period for assets transferred from a trust in which the institutionalized individual (or spouse) had an interest will be determined based on a 60 month look-back period. Penalty period does not begin to run until later of (1) creation of the trust or (2) the date on which individual is no longer a beneficiary of the trust. There are some exceptions for certain trusts, which provide for the individual and require that any amounts remaining at death would be paid to the State.

Exceptions: The transfer penalty does not apply to a transfer of the applicant's home, if it was transferred to the applicant's (1) spouse, (2) child under 21, (3) blind or disabled adult child, (4) sibling with an equity interest in the home and who resided in the home for at least a year prior to the individual's nursing home admission, or (5) adult child who resided in the home at least two years prior to the nursing home admission and who provided care which permitted the individual to remain at home.

As of August 5, 1997, the law making it a federal crime to give away assets in order to become eligible for Medicaid was repealed.

Qualified Income Trusts for Individuals with Income over Income Cap. A solution for individuals whose income exceeds the income cap referred to above is a qualified income trust. If the excess income of an individual whose income exceeds the income cap is deposited into a qualified income trust, the individual will have relief from the income cap. The trust may be created by the individual, if competent, by his or her guardian or spouse or by someone who has power of attorney (depending on the date of the POA and the specific language in the POA). These trusts have several very specific requirements and each one is reviewed and approved by attorneys for the Department of Children and Families.

LONG-TERM CARE INSURANCE

The number of long term care insurance policies sold is increased. Texas has adopted the Model Act of the National Association of Insurance Commissioners addressing long-term care policies. However, there is still a considerable variation among policies. It is important to closely review the policy to assure that it clearly meets the anticipated needs. As of January 1997 a portion of the premium payments on such policies may be eligible for the medical expense income tax deduction.

LIVING WILL

Texas law recognizes that competent adults may control all decisions relating to their health, including decisions to have life sustaining medical procedures withheld or withdrawn. Effective October 1, 1990, this was specifically extended to include food and water (nutrition and hydration). A living will must be signed in the presence of two witnesses - at least one of whom is neither a spouse nor blood relative. If the individual is not able to sign the declaration, it may be given orally with one of the witnesses signing for the declarant.

Without living will, there is provision for a health care surrogate (see below) to decide whether to withhold or withdraw life-prolonging procedures for an individual with a terminal condition, end-state condition or persistent vegetative state. The decision must be based on clear and convincing evidence of the individual's wishes. If there has been no health care surrogate designated, a proxy may be appointed from the individual's relatives and close friends who are reasonably available, willing and competent to act. In both cases, the individual must have a terminal condition, end-state condition or persistent vegetative state.

A federal law effective in November 1991 requires hospitals, nursing homes and other medical facilities receiving money from Medicare and Medicaid programs to inform patients of their medical care rights. Patients will receive written information explaining their options under state law such as living wills and designations of health care surrogate.

DESIGNATION OF HEALTH CARE SURROGATE

To provide for the situation where he or she becomes incapable of making such decisions, a competent individual may designate someone (a health care surrogate) to make health care decisions and provide informed consent to medical procedures.

The designation must be in writing and signed by the individual in the presence of two witnesses, at least one of whom is unrelated.

The statute (Texas Statute 765.201 - 765.205) presumes that a person is capable of making health care decisions for himself or herself unless he or she is determined to be incapable of doing so.

The attending physician determines whether the patient lacks capacity, along with a second physician. If capacity is lacking, the surrogate is notified that his or her authority has commenced.

If a patient has not designated a surrogate, or if the designated surrogate is unable or unwilling to act, the health care facility can seek appointment of a surrogate from among the individual's relatives and close friends who are reasonably available, willing and competent to act.

DURABLE POWER OF ATTORNEY

A general power of attorney authorizes the attorney-in-fact (the agent) to act for the person signing the power of attorney (the principal). Usually a general power of attorney is invalid when the principal becomes incapacitated or incompetent. However, a durable power of attorney continues to operate when there is incapacity or incompetence. It must contain specifically indicate that it is a durable power of attorney.

Before October 1, 1990, the attorney-in-fact in Texas was required to be closely related to the principal. Now any person can be appointed as the attorney-in-fact. Effective October 1, 1990, the power of attorney may include authority to arrange for and consent to medical, therapeutic, and surgical procedures, including the administration of drugs.

In the past many third parties, such as banks, brokers, etc. were unwilling to honor a power of attorney. Based on new legislation, durable powers of attorney signed on or after October 1, 1995 are more likely to be honored by third parties. Accordingly it is advisable to re-execute such documents after October 1, 1995, if possible.

FLORIDA GUARDIANSHIP LAW

Guardianship is a proceeding where the court appoints a person to see to the physical care and well-being of another (incapacitated) individual (the Ward) and/or to protect and oversee the incapacitated individual's properties and assets. Guardianship involves court supervision and approval of the various activities of the guardian on behalf of the ward.

Any adult resident of Texas (other than a felon or incompetent person) can be guardian of the property and person of another. In addition, banks and trust companies can act as guardian of the property. Non-residents can be appointed as guardian if closely related to the incapacitated individual.

Substantial changes were made to the guardianship law in 1989. Rather than an "all or nothing" approach to determining incapacity, the Ward is now evaluated to determine which rights and powers he/she can retain and which rights and powers the guardian should exercise. As the incapacitated individual's condition changes over time, the court will be again determine what, if any, additional rights and powers will be given to the guardian.

These changes were to protect the civil rights of the Ward, allowing them to retain as many rights and powers as possible, and to protect their property and assets from negligence or dishonesty of the guardian.

A consequence of the change in law has been a substantial increase in the cost of handling guardianship matters and additional reporting burdens on the individual serving as guardian.

REVOCABLE LIVING TRUST

Purposes of a Living Trust: To avoid probate administration since trust assets are not subject to probate. Many steps involved in probate administration must still be accomplished but without the supervision of the probate court; to provide for management of assets during lifetime; and to avoid guardianship and competency proceedings for person who becomes mentally or physically incapacitated. Without such a trust, a guardian must often be appointed to manage property of person who is legally incompetent. A durable power of attorney can accomplish this as well. A living trust is income tax and estate tax neutral. It can be used to accomplish estate tax planning.

Operation of Trust: The trust is created during lifetime by the grantor transferring property to a trustee (either an individual, a corporate trustee or both). Often the grantor serves as the first trustee and reserves the right to revoke the trust for usually the grantor's life. The grantor can also amend the trust to change trustees, or change dispositive provisions of the trust, after a chance to evaluate the operation and management of the trust.

As with a Will, validity of a trust may be attacked if undue influence or lack of capacity affected its creation. A professional can manage the trust property. If all grantor's assets have been transferred to the trust and the grantor later becomes disabled or incompetent, the trustee can continue to manage the trust for the benefit of the grantor without the need to appoint a guardian.

Trust assets are generally not subject to probate administration at the death of the grantor, although they are subject to the claims of creditors. This factor can reduce the costs and attorneys fees involved in probate administration. Upon the death of the grantor, property is disposed of as provided in the trust agreement (similar to what would be provided in a Will). However, due to concerns about lack of due process, many title companies require probate administration in order to insure title to real property in a trust, especially if the property is being sold within two years of the grantor's death -whether homestead or not.

There is no requirement of annual accountings to the court or court supervision of the management of assets. This can result in substantial savings of fees and expenses that would be required for guardianship during lifetime of the grantor. Trustee are required to be accountable to the Trust's beneficiaries.

Living trusts have been used by some grantors to avoid the elective share law, which provides that a spouse may elect to receive 30% of a deceased spouse's probate estate. Legislative changes, effective in 2001, dramatically increase the property subject to the elective share, including the property in a living trust.

Revocable trust may make grantor or spouse ineligible for Medicaid benefits to which he or she would be entitled if other planning steps were used.