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Study on Alzheimer’s demonstrates need For Elder Law Planning

by: Marco D. Chayet[1]

 

            Every 70 seconds someone in the United States develops Alzheimer’s.  A report entitled 2009 Alzheimer’s Disease Facts and Figures indicates that an estimated 5.1 million Americans over 65 have Alzheimer’s.[2]   The report goes on to indicate that about 2.7 million people over age 85 have the disease, but by the time the Baby Boomers reach 85 in 2031, an estimated 3.5 million boomers that age and older will have Alzheimer’s. In people over age 65, Alzheimer’s and dementia-related deaths are the fifth leading cause of death for people in the USA.  And while deaths from heart disease, stroke and breast and prostate cancers dropped from 2000-2006, deaths from Alzheimer’s disease increased by 47.1%.

 

            The statistics in this timely report are stunning. Individuals and their families who face a diagnosis of Alzheimer’s will quickly become overwhelmed with the legal, medical and financial requirements and realities of coping with this debilitating disease.  The emotional effect of this disease is not just relegated to the client who is diagnosed but is often felt more deeply by surrounding family and friends.

 

The work of an elder law attorney encompasses all aspects of planning, counseling, educating and advocating for the senior or disabled client, either directly, or with their family, friends or trusted professionals.  More specifically, elder law attorneys will assist you and your loved ones with many different issues related to estate planning, incapacity planning, disability planning, long-term care planning and public and private benefits. This includes the areas of guardianship, conservatorship, probate, Medicaid, Medicare, Social Security, Veterans Benefits, Special Needs Trusts and estate and trust administration.  An elder law attorney can also work with you if you are a fiduciary and need guidance and support in making decisions for a loved one when they cannot make a decision for themselves. You are a fiduciary if you are acting as an agent under medical power of attorney, financial power of attorney, guardian, conservator, trustee, executor or personal representative.

 

With the average cost of nursing home care in Metro Denver reaching over $85,000 per year for Alzheimer patients, the time for you and your loved ones to consult with an elder law attorney to make sure your legal affairs are in order is now.  Peace of mind can be achieved through proper elder law planning before a crisis presents itself to you or your loved one.

 



[1] Marco Chayet is an Elder Law attorney with the office of Chayet & Danzo, LLC, and the past Chair of the Elder Law Section of the Colorado Bar Association.  Marco can be reached at 303-355-8500 or Marco@ColoradoElderLaw.com and www.ColoradoElderLaw.com.

[2] As reported in USA Today March 24, 2009.

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Use of Trusts in Disability Planning

By Marco D. Chayet and Dawn R. Hewitt[1]

Chayet & Danzo, LLC

Elder Law Attorneys

             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 2012, the 300% limit is $2,094.  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 $2,094 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.



[1]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, 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.

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Legacy Planning – Does your checking account make you who you are?

 By Frank J. Danzo, III Esq.

A will is crucial for ensuring your wishes are respected, but there’s another tool to consider.  A legacy plan puts the focus not only on money and assets, but on your values, morals, traditions and accomplishments. The idea is to let survivors know where you stood and what you were about. In addition to helping folks document practical information that would be appropriate in the aftermath of their death, a legacy plan will also help them document information about who they are and the values and traditions they honor. Here’s how you can help your loved ones honor your memory:

Don’t delay

It’s never too early to put together a legacy plan, something that the Legacy Planning founder himself learned the hard way when his first wife suffered a fatal heart attack at 28. There’s no time like the present – take care of the details now.

Your priorities

Start by making a list of what matters most to you.  When you look back over your life and think of all you learned on this planet, what would you most like to pass on?  Write down, sometimes in letter form, the things that represent who you are and what you care about.  That could mean the charities you contribute to, information about how you’d like funeral services to be handled, the traditions you’d like to see your family carry on and related ideas.

Helpful resources

You could do this on your own, but it might be worth it to enlist the help of a professional. The process can usually be done in a single afternoon, and a legacy planner will walk you through each step so nothing is overlooked.  You’ll probably start by answering some questions, many of which will seem a little random – topics like your favorite childhood memory, or how you met your spouse. By doing this, you’re giving background information to your survivors so they’ll not only know what kind of causes you support, but why. Then you’ll be able to make a journal of vital information, which includes everything from your personal family history to instructions on how you want your children raised and your animals cared for.

Guide for survivors

Putting together a plan not only helps your survivors, it’s also a great chance to remind yourself of your values and priorities. These days, we’re so busy that it’s easy to put it off, and this process is a great opportunity to do it properly.  The process really focuses on allowing people to uncover, through questioning, what they care about, and then they can take actions in their lifetime with their time and money to have their legacy reflect who they are.

Not a will

This is not a will, nor is it a substitute for one. In fact, it isn’t a legal document.  That means even if you put together a legacy plan, you still need an estate plan, including a will, a power of attorney document and a health care proxy. They go hand in hand, but if you don’t have the money or time right now to do it all, the estate plan comes first. Be sure to check it every few years and make necessary changes and updates.

What matters most in your life, more than anything else?

 For many people, the answer is values, family, memories, and traditions—not money.  Relationships to family, friends, and the community are far more important to happiness than more money or more stuff.  Given this fact, it’s no surprise that when economic hard times loom, we tend to spend more time at home, stay connected with family and friends, and reflect on the things in our lives that matter most.

 With this in mind, you should consider “legacy planning.” It is similar to estate planning—but instead of creating a document that shares your possessions of financial value, this document shares your possessions of emotional value. This includes your life lessons, memories, personal values, and final wishes—information that is too valuable to risk being lost.  Our unique legacy planning program, makes legacy planning a satisfying and rewarding experience. It will help you gain clarity and give you confidence that everything you treasure will be passed on to those you love. Imagine the peace of mind you’ll have knowing that instead of unanswered questions, you’ll be leaving behind a meaningful legacy.

 Frank J. Danzo, III

 Chayet & Danzo, LLC

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Jobless Claims Drop To Lowest Level In 4 Years

 The number of people seeking unemployment benefits fell to the lowest point in almost four years last week, the latest signal that the job market is steadily improving.
The Labor Department says weekly applications for unemployment benefits dropped 13,000 to a seasonally adjusted 348,000. It was the fourth drop in five weeks and the fewest number of claims since March 2008.

Read more at cbsnews.com

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GE To Hire 5,000 Veterans Over Next 5 Years

General Electric Co. says it will hire 5,000 veterans over the next five years and invest $580 million to expand its aviation business.
The announcements are part of a four-day event that the global conglomerate is hosting with partners in Washington, D.C., that focuses on issues such as manufacturing and job creation in America.

Read more at cbsnews.com

 

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