Four Steps to Take Right After an Alzheimer’s Diagnosis

If you or a loved one has been diagnosed with Alzheimer’s disease, it is important to start planning immediately. There are several essential documents to help you once you become incapacitated, but if you don’t already have them in place, you need to act quickly after a diagnosis.

Having dementia does not mean an individual is not mentally competent to make planning decisions. The person signing documents must have “testamentary capacity,” which means he or she must understand the implications of what is being signed. Simply having a form of mental illness or disease does not mean that you automatically lack the required mental capacity. As long as you have periods of lucidity, you may still be competent to sign planning documents.

The following are some essential documents for someone diagnosed with dementia:

  • Power of Attorney. A power of attorney is the most important estate planning document for someone who has been diagnosed with Alzheimer’s disease or some other form of dementia. A power of attorney allows you to appoint someone to make decisions on your behalf once you become incapacitated. Without a power of attorney, your family would be unable to pay your bills or manage your household without going to court and getting a guardianship, which can be a time-consuming and expensive process.
  • Health Care Proxy. A health care proxy, like a power of attorney, allows you to appoint someone else to act as your agent for medical decisions. It will ensure that your medical treatment instructions are carried out. In general, a health care proxy takes effect only when you require medical treatment and a physician determines that you are unable to communicate your wishes concerning treatment.
  • Advanced Directive for Health Care or Living Will. Advanced directives and living wills explain what type of care you would like if you are unable to direct your own care. An advance directive can include a health care proxy or it can be a separate document. It may contain directions to refuse or remove life support in the event you are in a coma or a vegetative state or it may provide instructions to use all efforts to keep you alive, no matter what the circumstances.
  • Will and Other Estate Planning Documents. In addition to making sure you have people to act for you and your wishes are clear, you should make sure your estate plan is up to date, or if you don’t have an estate plan, you should draw one up.  Your estate plan directs who will receive your property when you die. Once you are deemed incapacitated, you will no longer be able to create an estate plan. An estate plan usually consists of a will, and often a trust as well. Your will is your legally binding statement on who will receive your property when you die, while a trust is a mechanism for passing on your property outside of probate.

In addition to executing these documents, it is also important to create a plan for long-term care. Long-term care is expensive and draining for family members. Developing a plan now for what type of care you would like and how to pay for it will help your family later on. Your attorney can assist you in developing that plan and drafting any necessary documents.

If you would like more information feel free to contact our office today.

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How to Handle Sibling Disputes Over a Power of Attorney

A power of attorney is one of the most important estate planning documents, but when one sibling is named in a power of attorney, there is the potential for disputes with other siblings. No matter which side you are on, it is important to know your rights and limitations.

A power of attorney allows someone to appoint another person — an “attorney-in-fact” or “agent” — to act in place of him or her – the “principal” — if the principal ever becomes incapacitated. There are two types of powers of attorney: financial and medical. Financial powers of attorney usually include the right to open bank accounts, withdraw funds from bank accounts, trade stock, pay bills, and cash checks. They could also include the right to give gifts. Medical powers of attorney allow the agent to make health care decisions. In all of these tasks, the agent is required to act in the best interests of the principal. The power of attorney document explains the specific duties of the agent.

When a parent names only one child to be the agent under a power of attorney, it can cause bad feelings and distrust. If you are dealing with a sibling who has been named agent under a power of attorney or if you have been named agent under a power of attorney over your siblings, the following are some things to keep in mind:

  • Right to information. Your parent doesn’t have to tell you whom he or she chose as the agent. In addition, the agent under the power of attorney isn’t required to provide information about the parent to other family members.
  • Access to the parent. An agent under a financial power of attorney should not have the right to bar a sibling from seeing their parent. A medical power of attorney may give the agent the right to prevent access to a parent if the agent believes the visit would be detrimental to the parent’s health.
  • Revoking a power of attorney. As long as the parent is competent, he or she can revoke a power of attorney at any time for any reason. The parent should put the revocation in writing and inform the old agent.
  • Removing an agent under power of attorney. Once a parent is no longer competent, he or she cannot revoke the power of attorney. If the agent is acting improperly, family members can file a petition in court challenging the agent. If the court finds the agent is not acting in the principal’s best interest, the court can revoke the power of attorney and appoint a guardian.
  • The power of attorney ends at death.If the principal under the power of attorney dies, the agent no longer has any power over the principal’s estate. The court will need to appoint an executor or personal representative to manage the decedent’s property.

If you are drafting a power of attorney document and want to avoid the potential for conflicts, there are some options. You can name co-agents in the document. You need to be careful how this is worded or it could cause more problems. The best way to name two co-agents is to let the agents act separately. Another option is to steer clear of family members and name a professional fiduciary.

Sibling disputes over how to provide care or where a parent will live can escalate into a guardianship battle that can cost the family thousands of dollars. Drafting a formal sibling agreement (also called a family care agreement) is a way to give guidance to the agent under the power of attorney and provide for consequences if the agreement isn’t followed. Even if you don’t draft a formal agreement, openly talking about the areas of potential disagreement can help. If necessary, a mediator can help families come to an agreement on care.

If you would like to learn more about powers of attorney and how you can benefit from having one, please give us a call today!

Standalone Retirement Trusts

Nowadays, most Americans hold their wealth in retirement accounts. When it comes to
inheritance and estate planning, special considerations are necessary to ensure that these assets are protected and distributed according to the account holder’s wishes. 

Retirement assets, such as IRAs, are typically passed via beneficiary designation. For example, for a married couple with children, it would be common to designate the spouse as primary beneficiary and children as secondary. However, in almost all occasions it is advantageous to name a trust—rather than a particular individual—as the designated beneficiary. Once the retirement account becomes inherited by a non-spouse beneficiary (i.e. children), it is important to understand that IRS regulations
treat this inherited retirement account differently. Specifically, once inherited, the beneficiary is obligated to begin taking required minimum distributions from such funds within a more immediate time horizon of either five years or over the beneficiary’s life expectancy.  An IRA administrator will also offer the option of receiving the proceeds as a lump sum payment, which is very often discouraged, especially in the case of minor or financially irresponsible children. The preferred goal in planning for inheriting retirement assets is to maximize this window of time so that the tax-sheltered, long-term growth benefits of retirement accounts are maximized.

IRAs and other retirement instruments were designed precisely for a specific purpose: retirement. They were not intended as a savings mechanism for future generations. Tax laws work according to this assumption, and so foresight and planning are necessary when including such holdings in an estate to be passed on to beneficiaries. Trusts can serve as an appropriate conduit to protect and preserve these assets.

Some will consider a standard revocable living trust by default when structuring a retirement trust.  This could cause unfavorable consequences, however, including a more fixed distribution schedule and the lack of creditor protection. Further, the IRS may a not consider the revocable living trust as a designated third party beneficiary, resulting in the assets becoming immediately, taxable income.

A Standalone Retirement Trust is a trust that is created for the sole purpose of serving as the beneficiary of the remainder of your IRA funds (and other qualified funds, e.g. 401(k)). Thus, the trust will be funded after you pass with whatever is left of your retirement assets. Then, the trustee of the Standalone Retirement Trust will oversee the distribution of the funds to your heir(s) in a manner you see fit.

A Standalone Retirement Trust will provide you with significantly greater control over the manner in which your remaining retirement funds are distributed to your loved ones, rather than just control who will receive the funds after you die—as is the case with leaving your IRA through a simple beneficiary designation.

Other potential benefits of Standalone Retirement Trusts include 

  • Asset protection in the event of a divorce;
  • Creditor protection;
  • Generation-skipping tax benefits;
  • Special Needs/Supplemental Trust benefits;
  • Alerts the beneficiary of any tax consequences of an immediate payout;
  • Allows beneficiary’s to thinly stretch tax obligations over time;
  • Alleviates the need for a court appointed guardian for minor beneficiaries
  • Provides a beneficiary with asset protection in the event the beneficiary becomes disabled; and 
  • Allows for successor beneficiaries. 

For more information on Standalone Retirement Trusts contact our office today. 

Integrating Long Term Care Into Your Estate Plan

What Is Long Term Care?

When most people think of estate planning they focus on how their assets will be disposed of when they are deceased. A well drafted estate plan, however, can and should take into consideration the need for long term care.

Long-term care provides a range of services and support for you individuals who are unable to care for themselves due to a chronic illness or disability. Most long-term care isn’t medical care, but rather help with basic personal tasks of everyday life, sometimes called activities of daily living. All too often, individuals and families wait until a medical crisis actually happens before considering long term care, which usually leads to throwing together a hasty estate plan in the face of mounting medical costs.

Why Consider Long Term Care?

Long term care costs can easily drain one’s finances in a relatively short time. According to the Harvard University Study in Compensation & Benefits Review, 72% of Americans become impoverished after just one year of nursing home care. Long term care isn’t typically covered by private medical insurance and major medical insurance plans. Medicare only pays for skilled and rehabilitative care after a three-day hospital stay; this excludes custodial care, the assistance someone needs for daily living. Medicaid only covers nursing home bills after a loved one is bereft of assets.

Whether the care you need takes place in a nursing home, assisted living facility, or with an in-home provider, the costs can mount with alarming speed. According to the Genworth 2016 Annual Cost of Care Study, the cost of receiving long term care continues to rise sharply year over year, especially for services in the home, where the vast majority of Americans receive long term care and for a longer period of time than facilities. The median monthly costs for the services of a homemaker or an in-home health aide for 44 hours a week are $3,813 and $3,861, respectively. The average monthly cost of a private nursing home room is $7,698, up 1.24 percent from 2015.  The cost of a semi-private room is up 2.27 percent to $6,844 per month.  Assisted living communities saw a slight increase in costs of .8 percent to $3,628 per month.

Long Term Care Planning in Your Estate Plan

As with all major life situations, careful planning will ensure the financial resources are available when they are needed. If your estate plan does not consider long term care, chances are you haven’t taken a realistic look at your assets and how the potential need for long term care may affect them. Talk to an estate planning attorney about the following factors to get on the right track:

  • Set Reasonable Expectations for Long Term Care

While we can’t predict what will happen to us and when it will happen, we can take an educated guess. For example, are there any major diseases that run in your family? Are you involved in any kind of activity that could affect your body long term? While considering these things may feel uncomfortable, it is far better to consider them early on and plan accordingly, rather than face the reality of long term care with no plan at all.

  • Consider a Long Term Care Insurance Policy

Since it is highly likely that Medicare or medical insurance will not cover long term care costs, a long term care insurance policy can ensure that your financial assets are not drained due to long term care costs. Most people assume that long term care will be covered by Medicaid and face the rude awakening of having their financial assets drained after learning that it doesn’t.

Consider and discuss long term care insurance policies with affordable premiums that won’t rise drastically over time. Begin this process as early as possible, as the younger you are when you apply, the lower the long term care insurance premiums are.

Benefits of Long Term Care Insurance Policies Include:

– Preserve savings and assets for family and friends;

– Help maintain one’s financial independence from family and friends, often    eliminating the need to borrow money for long-term care costs;

– Relieve family and friends of caregiving tasks, as paying for professional care becomes an affordable option;

– Allow a loved one to choose where he receives care. If Medicaid pays for care, a nursing home is the only option. People can design their policy depending on where they want to receive care: in a nursing home, in the community, at home, or in an assisted living facility; and

– Expand the range of services a loved one receives, including: care from visiting nurses, home health aides and friendly visitors programs; home-delivered meals and chore services; and time in adult daycare centers and respite services for caregivers.

  • Have Your Advanced Medical Directive, Power of Attorney, and Trust(s) Drafted

In the event that you are unable to make medical decisions for yourself, the last thing you want is for your family and/or friends to fight over them. Have an estate planning attorney draft you an Advanced Medical Directive outlining the treatment you want to be given if you are unable to do so. Otherwise, you run the risk of a lengthy court process in which a court will appoint someone to make decisions on your behalf.

Revocable or irrevocable trusts, such as a life insurance trusts have proven to be effective long term care planning tools for individuals of all ages, as they provide tax benefits and allow the donor to direct how the life insurance proceeds will be disposed of at the donor’s death.

While planning for long term care may seem like a daunting task, those who do plan are able to live with the peace of mind of knowing that they are covered if a need for long term care ever arises. Contact our office today to learn how we can help you create an estate plan that includes long term care.