The Difference between Power of Attorney and Guardianship for Elderly Parents – Annapolis and Towson Estate Planning

The primary difference between guardianship and power of attorney is in the level of decision-making power, although there are many intricacies specific to each appointment, explains Presswire’s recent article entitled “Power of Attorney and Guardianship of an Elderly Parent.”

The interactions with adult protective services, the probate court, elder law attorneys and healthcare providers can create a huge task for an agent under a power of attorney or court-appointed guardian. Children acting as agents or guardians are surprised about the degree of interference by family members who disagree with decisions.

Doctors and healthcare providers do not always recognize the decision-making power of an agent or guardian. Guardians or agents may find themselves fighting the healthcare system because of the difference between legal capacity and medical or clinical capacity.

A family caregiver accepts a legal appointment to provide or oversee care. An agent under power of attorney is not appointed to do what he or she wishes. The agent must fulfill the wishes of the principal. In addition, court-appointed guardians are required to deliver regular reports to the court detailing the activities they have completed for elderly parents. Both roles must work in the best interest of the parent.

Some popular misperceptions about power of attorney and guardianship of a parent include:

  • An agent under power of attorney can make decisions that go against the wishes of the principal
  • An agent cannot be removed or fired by the principal for abuse
  • Adult protective services assumes control of family matters and gives power to the government; and
  • Guardians have a responsibility to save money for care, so family members can receive an inheritance.

Those who have a financial interest in inheritance can be upset when an agent under a power of attorney or a court-appointed guardian is appointed. Agents and guardians must make sure of the proper care for an elderly parent. A potential inheritance may be totally spent over time on care.

In truth, the objective is not to conserve money for family inheritances, if saving money means that a parent’s care will be in jeopardy.

Adult protective services workers will also look into cases to make certain that vulnerable elderly persons are protected—including being protected from irresponsible family members. In addition, a family member serving as an agent or family court-appointed guardian can be removed, if actions are harmful.

Agents under a medical power of attorney and court-appointed guardians have a duty to go beyond normal efforts in caring for an elderly parent or adult. They must understand the aspects of the health conditions and daily needs of the parent, as well as learning advocacy and other skills to ensure that the care provided is appropriate.

Ask an experienced elder law attorney about your family’s situation and your need for power of attorney documents with a provision for guardianship.

Reference: Presswire (Jan. 14, 2021) “Power of Attorney and Guardianship of an Elderly Parent”

 

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How to Be an Effective Advocate for Elderly Parents – Annapolis and Towson Estate Planning

Family caregivers must also understand their loved one’s wishes for care and quality of life. They must also be sure those wishes are respected. Further, it means helping them manage financial and legal matters, and making sure they receive appropriate services and treatments when they need them.

AARP’s recent article entitled “How to Be an Effective Advocate for Aging Parents” says if the thought of being an advocate for others seems overwhelming, take it easy. You probably already have the skills you need to be effective. You may just need to develop and apply them in new ways. AARP gives us the five most important attributes.

  1. Observation. Caregivers can be too busy or tired, to see small changes, but even slightest shifts in a person’s abilities, health, moods, safety needs, or wants may be a sign of a much more serious medical or mental health issue. You should also monitor the services your family member is getting. You can take notes on your observations about your loved one to track any changes over time.
  2. Organization. It is hard to keep track of every aspect of a caregiving plan, but as an advocate, you must manage your loved one’s caregiving team. This includes creating task lists and organizing the paperwork associated with health, legal, and financial matters. You will need to have easy access to all legal documents, like powers of attorney for finances and health care. If needed, you might take an organizing course or work with a professional organizer. There are also many caregiving apps. You should also, make digital copies of key documents, such as medication lists, medical history, powers of attorney and living wills, so you can access them from anywhere.
  3. Communication. This may be the most important attribute. You need communication for building relationships with other caregivers, family members, attorneys and healthcare professionals. Be prepared for meetings with lawyers, medical professionals and other providers.
  4. Probing. Caregivers need to gather information, so do not be shy about it. Educate yourself about your loved one’s health conditions, finances and legal affairs. Create a list of questions for conversations with doctors and other professionals.
  5. Tenacity. Facing a dysfunctional and frustrating health care system can be discouraging. You must be tenacious. Here are a few suggestions on how to do that:
  • Set clear goals and focus on the end result you want.
  • Keep company with positive and encouraging people.
  • Heed the advice of experienced caregivers’ stories, so you understand the triumphs and the challenges.
  • Be positive and be resilient.

Reference: AARP (Sep. 24, 2020) “How to Be an Effective Advocate for Aging Parents”

 

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SECURE Act has Changed Special Needs Planning – Annapolis and Towson Estate Planning

The SECURE Act eliminated the life expectancy payout for inherited IRAs for most people, but it also preserved the life expectancy option for five classes of eligible beneficiaries, referred to as “EDBs” in a recent article from Morningstar.com titled “Providing for Disabled Beneficiaries After the SECURE Act.” Two categories that are considered EDBs are disabled individuals and chronically ill individuals. Estate planning needs to be structured to take advantage of this option.

The first step is to determine if the individual would be considered disabled or chronically ill within the specific definition of the SECURE Act, which uses almost the same definition as that used by the Social Security Administration to determine eligibility for SS disability benefits.

A person is deemed to be “chronically ill” if they are unable to perform at least two activities of daily living or if they require substantial supervision because of cognitive impairment. A licensed healthcare practitioner certifies this status, typically used when a person enters a nursing home and files a long-term health insurance claim.

However, if the disabled or ill person receives any kind of medical care, subsidized housing or benefits under Medicaid or any government programs that are means-tested, an inheritance will disqualify them from receiving these benefits. They will typically need to spend down the inheritance (or have a court authorized trust created to hold the inheritance), which is likely not what the IRA owner had in mind.

Typically, a family member wishing to leave an inheritance to a disabled person leaves the inheritance to a Supplemental Needs Trust or SNT. This allows the individual to continue to receive benefits but can pay for things not covered by the programs, like eyeglasses, dental care, or vacations. However, does the SNT receive the same life expectancy payout treatment as an IRA?

Thanks to a special provision in the SECURE Act that applies only to the disabled and the chronically ill, a SNT that pays nothing to anyone other than the EDB can use the life expectancy payout. The SECURE Act calls this trust an “Applicable Multi-Beneficiary Trust,” or AMBT.

For other types of EDB, like a surviving spouse, the individual must be named either as the sole beneficiary or, if a trust is used, must be the sole beneficiary of a conduit trust to qualify for the life expectancy payout. Under a conduit trust, all distributions from the inherited IRA or other retirement plan must be paid out to the individual more or less as received during their lifetime. However, the SECURE Act removes that requirement for trusts created for the disabled or chronically ill.

However, not all of the SECURE Act’s impact on special needs planning is smooth sailing. The AMBT must provide that nothing may be paid from the trust to anyone but the disabled individual while they are living. What if the required minimum distribution from the inheritance is higher than what the beneficiary needs for any given year? Let us say the trustee must withdraw an RMD of $60,000, but the disabled person’s needs are only $20,000? The trust is left with $40,000 of gross income, and there is nowhere for the balance of the gross income to go.

In the past, SNTs included a provision that allowed the trustee to pass excess income to other family members and deduct the amount as distributable net income, shifting the tax liability to family members who might be in a lower tax bracket than the trust.

Special Needs Planning under the SECURE Act has raised this and other issues, which can be addressed by an experienced estate planning attorney.

Reference: Morningstar.com (Dec. 9, 2020) “Providing for Disabled Beneficiaries After the SECURE Act”

 

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Do I Qualify as an Eligible Designated Beneficiary under the SECURE Act? – Annapolis and Towson Estate Planning

An eligible designated beneficiary (EDB) is a person included in a unique classification of retirement account beneficiaries. A person may be classified as an EDB, if they are classified as fitting into one of five categories of individuals identified in the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The bill passed in December 2019 and is effective for all inherited retirement accounts, as of the first of this year.

Investopedia’s recent article entitled “Eligible Designated Beneficiary” explains that these people get special treatment and greater flexibility to withdraw funds from their inherited accounts than other beneficiaries.

With the SECURE Act, there are now three types of beneficiaries. It is based on the individual’s connection to the original account owner, the beneficiary’s age, and his or her status as either an individual or a non-person entity. However, an EDB is always an individual. On the other hand, an EDB cannot be a trust, an estate, or a charity, which are considered not designated beneficiaries. There are five categories of individuals included in the EDB classification. These are detailed below.

In most instances, except for the exceptions below, an EDB must withdraw the balance from the inherited IRA account over the beneficiary’s life expectancy. There is optional special treatment allowed only for surviving spouses, which is explained below. When a minor child reaches the age of majority, he or she is no longer considered to be an EDB, and the 10-year rule concerning withdrawal requirements for a designated beneficiary applies.

Here are the five categories of EDBs.

Owner’s surviving spouse. Surviving spouses get special treatment, which lets them step into the shoes of the owner and withdraw the balance from the IRA over the original owner’s life expectancy. As another option, they can roll an inherited IRA into their own IRA and take withdrawals at the point when they would normally take their own required minimum distributions (RMDs).

Owner’s minor child. A child who is not yet 18 can make withdrawals from an inherited retirement account using their own life expectancy. However, when he or she turns 18, the 10-year rule for designated beneficiaries (who are not EDBs) applies. At that point, the child would have until December 31 of the 10th year after their 18th birthday to withdraw all funds from the inherited retirement account. A deceased retirement account owner’s minor child can get an extension, up until age 26, for the start of the 10-year rule, if he or she is pursuing a specified course of education.

An individual who is disabled. The tax code says that an individual is considered to be disabled if he or she is “unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long continued and indefinite duration.” A disabled person who inherits a retirement account can use their own life expectancy to calculate RMDs.

An individual who is chronically ill. The tax code states that “the term ‘chronically ill individual’ means any individual who has been certified by a licensed healthcare practitioner as—

  • being unable to perform (without substantial assistance from another individual) at least two activities of daily living for a period of at least 90 days, due to a loss of functional capacity,
  • having a level of disability similar (as determined under regulations prescribed by the Secretary in consultation with the Secretary of Health and Human Services) to the level of disability described in clause (i), or
  • requiring substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment.”

A chronically ill individual who inherits a retirement account can use their own life expectancy to determine the RMDs.

Any other person who is less than 10 years younger than the decedent. This is a catch-all that includes certain friends and siblings (depending on age), who are identified as beneficiaries of a retirement account. This also excludes most adult children (who are not disabled or chronically ill) from the five categories of EDBs. A person in this category who inherits a retirement account is permitted to use their own life expectancy to calculate RMDs.

Reference: Investopedia (June 25, 2020) “Eligible Designated Beneficiary”

 

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What are the Blind Spots in Social Security? – Annapolis and Towson Estate Planning

The SimplyWise survey also found that there are five areas that are especially confusing to people. Only one in 300 of those who took a five-question quiz answered all the questions correctly, reports Think Advisor in the article entitled “5 Common Blind Spots on Social Security.”

Here are some Social Security questions that might be relevant and not knowing the answers could cost you thousands of dollars a year in income.

  1. What age do I claim to maximize my monthly earned Social Security benefit? The age is 70, although 62 years is when an individual can first make a claim. However, your benefits grow each year you wait—up to age 70. According to SimplyWise, only 42% of quiz takers got this answer right.
  2. What is the earliest age non-disabled people can get survivor benefits? A mere 9% answered this correctly. It is age 60. Many think it is age 62, the age people can begin claiming Social Security.That is correct for earned benefits and spousal benefits.
  3. Is a current spouse required to be getting Social Security benefits, for the other spouse to qualify for spousal benefits? Yes. Just 20% of respondents got this answer correct. It is important to understand that if both spouses are claiming Social Security, one can either receive their own benefit or 50% of their spouse’s amount, whichever is more.
  4. Is a divorced spouse able to get survivor benefits? Yes, and just 38% of people got this answer right. The criteria is somewhat different than for married people. The marriage must have lasted at least 10 years, and there are certain rules that apply to remarrying. However, divorced spouses can collect survivor benefits under a deceased ex-spouse.
  5. Can divorced spouses get spousal benefits? Yes, and 67% got this answer correct. Divorced spouses who were married for at least 10 years and have not remarried can claim spousal benefits.

Reference: Think Advisor (Feb. 13, 2020) “5 Common Blind Spots on Social Security”

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Do I Really Need a Health Care Proxy? – Annapolis and Towson Estate Planning

The Pauls Valley Democrat’s recent article entitled “Advance directives and living wills” explains that an Advance Directive has three parts:

  •  A living will
  •  Naming of your health care agent; and
  •  Your directions for anatomical gifts.

The individual that you name as your Health Care Proxy will make decisions for your treatment and care, if you are unable to do so. These decisions may extend to all medical issues and are not limited to end-stage, life determining decisions that are mentioned in your living will. This is a form of power of attorney that authorizes your agent to act in your behalf to address issues like these:

  1. Accessing your medical information
  2. Discussing your treatment options with your healthcare providers
  3. Getting second opinions on your diagnosis
  4. Selecting and authorizing various medical tests
  5. Your placement in a hospital or care facility
  6. Transferring your care to a new physician; and
  7. Communicating your wishes on life support in terminal or unconscious situations.

For end of life decisions, your health care proxy is bound by your written wishes as expressed in your living will. Life support can be terminated, only if you so authorize in writing. Your healthcare proxy cannot make that decision for you, because that is “personal” to you. You may select one or more persons to act as your proxy, although if two are selected, you should predefine what to do in the event of a conflict.

A best practice is to choose a person who is younger than you and who is geographically close. A person with time to assist you and with whom you are willing to share in advance your wishes, likes and dislikes as to medical care. This person should be trusted to act and honor your wishes.

Because many decisions relate to your very personal concerns about religion, death and dying, these feelings should be shared with your health care proxy before any serious situation.

The Advance Directive is a very important document that pertains to your wishes, as they relate to medical care, end-of-life and death.

Parts I and II can discuss your wishes for care treatment, as well as your choice of a person to represent your wishes. These are two very important issues. Take the time to consider the advance written expression of your own wishes.

Reference: Pauls Valley Democrat (Feb. 12, 2020) “Advance directives and living wills”

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How Can I Fund A Special Needs Trust? – Annapolis and Towson Estate Planning

TapInto’s recent article entitled “Ways to Fund Special Needs Trusts” says that when sitting down to plan a special needs trust, one of the most urgent questions is, “When it comes to funding the trust, what are my options?”

There are four main ways to build up a third-party special needs trust. One way is to contribute personal assets, which in many cases come from immediate or extended family members. Another possible way to fund a special needs trust, is with permanent life insurance. In addition, the proceeds from a settlement or lawsuit can also make up the foundation of the trust assets. Finally, an inheritance can provide the financial bulwark to start and fund the special needs trust.

Families choosing the personal asset route may put a few thousand dollars of cash or other assets into the trust to start, with the intention that the initial investment will be augmented by later contributions from grandparents, siblings, or other relatives. Those subsequent contributions can be willed to the trust, or the trust may be named as a beneficiary of a retirement or investment account. It is vital that families use the services of an elder law or special trusts lawyer. Special needs trusts are very complicated, and if set up incorrectly, it can mean the loss of government program benefits.

If a special needs trust is started with life insurance, the trustor will name the trust as the beneficiary of the policy. When the trustor passes away, the policy’s death benefit is left, tax free, to the trust. When a lump-sum settlement or inheritance is invested within the trust, this can allow for the possibility of growth and compounding. With a worthy trustee in place, there is less chance of mismanagement, and the money may come out of the trust to support the beneficiary in a wise manner that does not risk threatening government benefits.

In addition, a special needs trust can be funded with tangible, non-cash assets, such as real estate, securities, art or antiques. These assets (and others like them) can be left to the trustee of the special needs trust through a revocable living trust or will. Note that the objective of the trust is to provide the trust beneficiary with non-disqualifying cash and assets owned by the trust. As a result, these tangible assets will have to be sold or liquidated to meet that goal.

As mentioned above, you need to take care in the creation and administration of a special needs trust, which will entail the use of an experienced attorney who practices in this area and a trustee well-versed in the rules and regulations governing public assistance. Consequently, the resulting trust will be a product of close collaboration.

Reference: TapInto (February 2, 2020) “Ways to Fund Special Needs Trusts”

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How Do I Plan for My Incapacity? – Annapolis and Towson Estate Planning

The Post-Searchlight’s recent article, “How to go about planning for incapacity,” advises that planning ahead can make certain that your health-care wishes will be carried out, and that your finances will continue to be competently managed.

Incapacity can strike at any time. Advancing age can bring dementia and Alzheimer’s disease, and a serious illness or accident can happen suddenly. Therefore, it’s a real possibility that you or your spouse could become unable to handle your own medical or financial affairs.

If you become incapacitated without the proper plans and documentation in place, a relative or friend will have to petition the court to appoint a guardian for you. This is a public procedure that can be stressful, time consuming and costly. In addition, without your directions, a guardian might not make the decisions you would have made.

Advance medical directives. Without any legal documents that state your wishes, healthcare providers are obligated to prolong your life using artificial means, if necessary, even if you really don’t want this. To avoid this happening to you, sign an advance medical directive. There are three types of advance medical directives: a living will, a durable power of attorney for health care (or health-care proxy) and a Do Not Resuscitate order (DNR). Each of these documents has its own purpose, benefits and drawbacks, and may not be effective in some states. Employ an experienced estate planning attorney to prepare your medical directives to make certain that you have the ones you’ll need and that all documents are consistent.

Living will. This document lets you stipulate the types of medical care you want to receive, despite the fact that you will die as a result of the choice. Check with an estate planning attorney about how living wills are used in your state.

Durable power of attorney for health care. Also called a “health-care proxy,” this document lets you designate a representative to make medical decisions on your behalf.

Do Not Resuscitate order (DNR). This is a physician’s order that tells all other medical staff not to perform CPR, if you go into cardiac arrest. There are two types of DNRs: (i) a DNR that’s only effective while you are hospitalized; and (ii) and DNR that’s used while you’re outside the hospital.

Durable power of attorney (DPOA). This document lets you to name an individual to act on your behalf. There are two types of DPOA: (i) an immediate DPOA. This document is effective immediately; and (ii) a springing DPOA, which isn’t effective until you’ve become incapacitated. Both types end at your death. Note that a springing DPOA isn’t legal in some states, so check with an estate planning attorney.

Incapacity can be determined by (i) physician certification where you can include a provision in a durable power of attorney naming one or more doctors to make the determination, or you can state that your incapacity will be determined by your attending physician at the relevant time; and (ii) judicial finding where a judge is petitioned to determine incapacity where a hearing is held where medical and other testimony will be heard.

Reference: The Post-Searchlight (December 13, 2019) “How to go about planning for incapacity”

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How to Spot Problems at Nursing Homes – Annapolis and Towson Estate Planning

The best time to shop for a nursing home, is when you do not need one. If you wait until you can no longer safely or comfortably live on your own, you probably will not be in a position to do a lot of legwork to investigate facilities. Do your research well ahead of time, so you know the nursing homes in your area that provide high-quality care and, more importantly, the ones that have significant problems.

As you evaluate and compare facilities, you need to know how to spot problems at nursing homes. The marketing brochure, website and lobby might be lovely, but you should base your decision about a long-term care facility on much more data than those things. Here are some tips on how to dig for possible problems at nursing homes:

  • Online search. Check out the nursing home’s website to get an overview of the services it offers and the industry affiliations or certifications it has. Look at the daily menus to see if the meals are nutritious and have enough variety. Most people would not enjoy eating the same main course two or three times a week. Look at the activities calendar to see if you would be happy with the planned social events. On some websites, you can view the floor plans of the resident rooms.
  • Ask your primary care doctor to name a few facilities he would recommend for his parents, and those where he would not want them to live.
  • Local Office on Aging location. Every state has an Office on Aging. Contact them to get as much information as you can about safety records, injuries, deaths, regulation violations and complaints about local nursing homes.
  • Your state’s Long-term Care Ombudsman (LCO). Every state also has an Ombudsman who investigates allegations against nursing homes and advocates for the residents. Your state LCO should have a wealth of information about the facilities in your area.
  • State Online Database or Reporting System. Some states have online databases or collect reports about nursing homes.
  • Medicare’s Nursing Home Compare website. Medicare maintains an online tool, Nursing Home Compare, that provides detailed information on nursing homes. Every nursing home that gets any funding from Medicare or Medicaid is in this database. You can enter the name of a specific nursing home or search for all the facilities in a city or zip code. The tool includes information about abuse at long-term care facilities. On the webpage, you can explore the Special Focus Facility section to find nursing homes with a history of problems.
  • Word of mouth. Ask your friends, relatives and neighbors to recommend a quality nursing home. Personal experience can be extremely valuable.
  • Make a short list of the top candidates. After you collect as much information as you reasonably can, narrow your options down to four or five facilities that best meet your needs and preferences.
  • Visit your top choices. There is no substitute for going to a nursing home and checking it out in person. Pay attention to the cleanliness of the place throughout, not just in the lobby. Give the facility the “sniff” test. Determine whether they use products to mask unpleasant odors, instead of cleaning thoroughly. See whether the residents are well-groomed and wearing fresh, clean clothes. Observe the interaction of the staff with the residents. Notice whether people who need assistance at mealtime, get the help they need without having to wait.
  • Take online reviews with a grain of salt. Fake reviews are all over the internet. If you see a nursing home with only a few reviews, and they are all five stars, be skeptical.

Once you gather this information, you will be ready in the event you need to stay in a nursing home for a short recuperation from surgery or longer term.

References:

AARP. “Finding a Nursing Home: Don’t Wait Until You Need One to Do the Research.” (accessed December 5, 2019) https://www.aarp.org/caregiving/basics/info-2019/finding-a-nursing-home.html

CMS. “Find a nursing home.” (accessed December 5, 2019) https://www.medicare.gov/nursinghomecompare/search.html

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