Mary Ellen Geist, formerly a high-powered New York radio journalist, has written about her experiences as a caregiver for her father. Her book, Measure of the Heart, tells her story of returning home to Michigan to care for her father suffering from Alzheimer’s. MSNBC recently interviewed Mary (video here) and provided a number of excerpts from her new book here.

Perhaps the most stunning aspect of her story is her first-hand account of the breadth of the care-giving generation. Statistics show that the population with Alzheimer’s or some other disabling condition is increasing with the aging of the population. The consequence is that the number of caregivers is also increasing. As Mary Ellen Geist writes:

It is safe to say that each day in the United States dozens of daughters and sons are contemplating transferring jobs or quitting them altogether to respond to the needs of aging parents.

She describes a hidden community of caregivers who know each other at first sight:

We find each other easily in crowds. The daughters — we look each other in the eye, as if to ask, Where’s your husband? Where are your children? Are you single, too? Did you leave your life in a big city to come home to help your parents, too?

We often have unkempt hair, no makeup, and a look of exasperation in our eyes. We are trying to hide the fact that we have just wrestled our parents into tennis shoes after coaxing them to finish their cereal and explaining to them what pills are and why they have to take them, and where we are going today. I see faces that look like my mother’s that seem to say, This shouldn’t be happening to me. I don’t deserve this. This was supposed to be the best time in our lives….

Mary Ellen Geist seems to be at her best when she relates how the time with her father is redeemed. Helping him to through his illness has its own unexpected, bittersweet rewards:

He’s always so glad to hear about the history of our family, and each time it is brand new. After I tell him that each of us went to college and what has transpired since then in our lives, he says, “Aren’t we lucky?”

Indeed, the title of the book is taken from the transformation of her own values and outlook that has taken place since she gave up her city life and moved back home to be with her family:

Some of us realize that we are coming home not only to help do the remembering for our Alzheimer’s-afflicted parents, but also to remember something very important about ourselves. We are coming home to learn how to measure our lives by new standards that we’ve never explored before, to measure our lives in a different way. Instead of defining ourselves by our careers, we’re defining ourselves by the amount of love our hearts can hold.

Question: I approached my local Veterans’ Administration office for information about the Aid and Attendance Pension. They told me I had too much money to receive the pension. But I have reoccurring medical expenses of more than $1,000.00 per month. Is there anything I can do?

Answer: This is a delicate situation. On the one hand, some estate planning could allow you to qualify for the Aid and Attendance Pension. On the other, you would be mistaken to think that qualification for the Aid and Attendance Pension alone is sufficient. You need to be planning ahead for Medicaid long-term care at the same time that you are qualifying for veterans’ benefits.

There are several different ways that you could adjust your estate plan in order to qualify for the veterans’ benefits. It is not uncommon to hear of people hoping to convert their assets into income using an annuity in order to qualify for the Aid and Attendance Pension. But this sort of planning could be very short-sighted. If the veteran ever needs Medicaid, the money placed in the annuity will have to go toward payment of the nursing home care. What’s even worse, the state of Michigan will have to be named as a remainder beneficiary. That means that if there is any money left in the annuity at the time of the veterans’ death, it will go to the state of Michigan to repay any Medicaid benefits received. Annuities can have a place in long-term care planning, but they must be used carefully.

It is very often possible to accelerate qualification for veterans’ benefits, but it must be done by an experienced estate planner in order to avoid problems with Medicaid qualification later on.

Perhaps the most important lesson an estate planning attorney can convey to a client is that your end-of-life decisions will be made for you-and possibly expose your estate to significant and unnecessary expense-unless you create legally enforceable estate plan documents. Without a clear expression of your wishes, some of your most important decisions may be made by a family member, a stranger, or a probate judge who may have no idea what your real wishes were. This can lead to increased costs, family disagreements, and other forms of waste. Several types of legal documents can help you and your family avoid these problems:

• A medical power of attorney is used to appoint someone to make your medical decisions and provide that person with guidance regarding your wishes.

• A financial power of attorney appoints someone to make your financial decisions. There are many different types of financial powers of attorney with significant differences between them. For example, whether your agent has the power to make gifts to others can have tax implications, as well as expose your estate to risk. On the other hand, without gifting authority, Medicaid planning can become more difficult.

• A living will can provide detailed instructions for how you wish to be treated during disability.

• A will is a set of instructions to the probate court for the distribution of your estate. This is one area that causes some financial loss to many families. The probate process is time-consuming and often expensive. It is not uncommon for the cost of administration to equal 4-8% of the value of an estate. In this economy many people are putting off their estate plans. A failure to plan altogether will almost certainly result in much more in the way of expense down the road.

• A revocable living trust is a document that provides instructions and authority to another person for handling your estate both during your lifetime and after your passing. Because the trust agreement is revocable, you can make changes to the agreement or remove property from the trust at any time before your death. A revocable living trust is useful for avoiding probate only and does nothing to protect against creditors or the cost of long-term care.

• An irrevocable trust is a set of instructions regarding your estate that generally cannot be changed by the creator of the trust in at least one way. So, for example, a trust would be irrevocable if the creator of the trust could not receive any principal placed in the trust.

If you should die or become disabled without at least some of these documents in place, it is very likely that your family will need to seek authority from a probate court to make decisions for you. The probate court has a number of procedures and powers that correspond in many respects to the estate plan documents listed above. In Michigan, the court receives its jurisdiction over these matter from the Estate and Protected Individuals Code, MCL 700.1101:

• A conservatorship is a procedure of the probate court in which a person is appointed to have authority over your property. The conservator must make regular accountings of your trust property

• A guardianship is a procedure by which the court establishes a decision-maker related to issues concerning your physical well-being, such as your medical care and where you live.

• A protective order can be granted that will provide authority for a specific action having to do with your estate, such as the transfer of your home.

• An estate of a deceased person can be distributed to creditors and heirs by means of probate. This procedure will generally take at least six months and cost at least 4-8% of the value of the estate. In the alternative, a trust administration will generally be less time-consuming and expensive and can be handled in a more discrete manner.

The difficulties with going to the probate court are many. First of all, the process will be much more time- consuming and expensive. Secondly, probate proceedings are generally public matters, though they often deal with subjects that are precisely things that people would prefer to keep private. But above all, it is very difficult for a probate judge to know exactly what a person may have wanted. And the judge must err on the side of safety and caution. The approach is understandable, and it is certainly not an error on the part of the judge who must be cautious, but it can nonetheless be costly when long-term care or disability issues are being handled and, more to the point, differ from what the protected person may have wanted.

One final point about decision-making: failure to execute proper estate plan documents will leave you in the default position. That is, your estate and your decisions will be governed by the state’s default rules. That is usually not a good position to be in for tax purposes and it is almost always disastrous when it comes to disability planning.

Sue Schiebel has written an excellent article on Medicaid Planning. While her article concerns MassHealth, which is the Massachusetts Medicaid program, the rules and ideas explained are the same in Michigan. She writes:

A lot of middle-aged people don’t realize Medicare, the federal health insurance program, pays for a very limited amount of skilled nursing home care. As we live longer, that means more of us will have to spend our own money for long-term care or must rely on MassHealth, the state health insurance for low income people. Many people wind up doing both — first using up many of their own assets to “spend down” to Medicaid limits so they are financially eligible for state help.

Medicaid qualification is a complex area of the law. To highlight just one counter-intuitive aspect, consider that donations to a church or charity are treated as gifts under the law. One making such a gift is technically creating a period of ineligibility for Medicaid. Strictly speaking, a person making significant donations to a church could be ineligible for Medicaid for several months after all other assets have been spent down. An elder law attorney helps families cope with these bizarre rules and avoid such unfortunate results.

Many of my clients are uneasy about placing their assets into a trust as part of an asset protection plan. In order to demystify the process and help you understand why you might consider having a trust drafted for your specific needs, I would like to explain some of the reasons you might consider having a trust and little bit of how a trust works.

Trusts are an important part of elder law and estate planning. Elder law is really the art and science of preserving personal and financial independence for seniors. Many forces threaten a senior’s independence, from ailing health to limited finances to extensive regulatory systems. The goal in creating comprehensive estate plans is to extend resources as much as possible and to create options. How is this possible? The right trust agreement is an important tool for achieving this goal.

Consider that property–whether a house, a car, or cash in the bank–can be owned by a trust. What this means is that a trustee will have control and legal title of property held in trust and a duty to manage that property according to the terms of the trust. This method of holding property has great flexibility and a number of important advantages.

To understand how this is possible, one must begin to see that under the law, ownership itself has many facets. It is possible, for example, not to own something for purposes of an obligation to a creditor, but at the same time to have full use and enjoyment of that same property. This apparent contradiction can be explained by the fact that beneficial enjoyment of property is not the same as simple ownership.

In general we tend to think about ownership like a baseball umpire thinks about a play at first base. Either the first baseman was holding the ball before the runner crossed first base or he wasn’t. In the same way, your name is either on the bank account number 5555551111 or it isn’t. Or so the everyday understanding of ownership goes.

If bank account number 5555551111 is held in trust for your benefit, whether you can be said to own that account will depend on whom you ask, when, and what the trust agreement says. The fact of the matter is that you can get very different answers about who owns what from the IRS and DHS, particularly with regard to property held in trust. In this way the rules of ownership with a carefully drafted trust will quickly start to seem more like juggling than baseball: you have control of the ball and sometimes you have the ball in your hand, but if you are a good juggler (or, to continue the analogy, you have a good trust) you will not be holding the ball at the critical moment. That is perhaps a tangled analogy, but it shows the delicate balancing that can be accomplished with a properly drafted trust (or a lot of practice juggling).

To give a more concrete example of how the various aspects of ownership can be effectively handled by a trust, consider that it is possible to have a trust with the following terms:

1. The principal placed in the trust will be unavailable for purposes of long-term care. Therefore, from the time property is placed in the trust, it will be out of the original owner’s name and the five year look-back period will begin to run.

2. For tax purposes, the principal held in the same trust will be owned by the original owner. The trust will not have to file a separate tax return, pay the higher rates that complex trusts are subjected to, or otherwise incur any additional tax liability for the original owner beyond the interest, capital gains, etc. that the original owner would otherwise have had.

3. The income generated by the principal held in the trust will be payable to the original owner. The assets held in the trust will therefore continue to provide support and income throughout retirement, but at the same time at least 50% of the assets held in the trust will be protected from the cost of long-term care. After 5 years, the entire principal will be protected from the cost of long-term care.

4. In some cases, this same trust can return the assets to the original owner. But only when the original owner decides it is necessary to do so.

A trust then, can be a legal document that allows you to enjoy your assets, but also to protect them. An attorney who understands the way that a trust will be read by the IRS, the Department of Human Services, the Department of Veteran’s Affairs and other government agencies can teach you how to juggle your finances and preserve your financial independence.

Retirement assets (401ks, IRAs, etc) are considered available assets for purposes of Medicaid qualification in Michigan. In simple terms, that means that those funds have to be spent down until the threshold for asset eligibility is met. In the case of a single person, asset eligibility is generally about $2,000.00, with some additional allowances for the homestead, modest life insurance and funeral expenses. In the case of a married person, the threshold is higher, and will be between $20,880.00 and $104,400.00, depending on the couple’s assets before entering the nursing home. For more details, see The Basics of Medicaid Qualification, below.

In order to avoid having to spend these assets on the cost of care, it is very common to annuitize the retirement assets. For a variety of reasons, I think this is something to avoid whenever possible. First of all, the return on such annuities is low. With inflation likely to increase in the present economic climate, it is difficult to recommend a long-term investment with a low return. An additional concern is that current law requires an annuity to pay out in level installments and in an actuarially sound manner. The days of the deferred annuity with a substantial amount held until after the passing of the owner are gone. Furthermore, under current law, the state of Michigan must be named as the remainder beneficiary after the community spouse or a disabled child. It is true that an annuity will provide secure retirement income for a community spouse, but it should be considered an alternative of last resort in light of these considerations.

Retirement assets present some of the most difficult problems in elder law, but there are solutions. With some intricate planning, one can use a solely for the benefit of trust, for example to preserve the tax-deferred funds and obtain qualification. This is an important alternative for families to consider so that retirement assets are not unnecessarily depleted by the cost of long-term care or restricted to minimal returns and subjected to estate recovery.

Retirement for many people is defined as the time when they are able to live off of the income from their assets combined with Social Security and perhaps a pension. But anything from a car accident to a stay in long-term care can quickly deplete retirement assets and jeopardize the fruits of a lifetime’s work. This can be particularly devastating for a married couple when one of the spouses falls ill and the assets of both must be devoted to the care of one. Medicaid law permits the Community Spouse (the spouse not in long-term care) to retain a maximum of $104,400.00 in non-exempt assets, but without planning, in many cases that amount can be lower.

Modern estate planning offers solutions to this problem and provides financial security in retirement. This form of estate planning is far more than naming beneficiaries on accounts or providing a list what is to go to whom. It is a matter of restructuring an estate to be sure that assets are protected and preserved for their intended purposes. These techniques allow security, tax benefits, and even asset protection for one’s heirs.

One often hears of estates consumed by the cost of long term care. See, for example this story. A modern estate plan can help you to ensure that you will receive the benefits of your assets without exposing those assets to the claims of creditors or the cost of nursing home care.

Mr. David Goldman has raised some interesting points regarding the free durable power of attorney posted here and free durable power of attorneys generally. There are many problems with such documents and I have mentioned them in the previous post. Above all, you should certainly understand that any decision you make to use such documents will be your own and cannot be based upon anything written here. Mr. Goldman takes the argument a bit further. The first point he makes is that one should read carefully to be sure “free” documents are in fact free. He found a “free” power of attorney form elsewhere that only revealed in the fine print that you would be charged $19.95 per month for downloading the document.

Mr. Goldman’s second point is that the durable power of attorney that was purportedly adapted for his Florida had some significant problems under Florida law:

[The free document] allowed me to simply revoke prior designations by putting a line in my document. Anyone who has been to a Florida Estate Planning Lawyer knows that to revoke a valid Durable Power Of Attorney one must file a revocation in the county where they live.

Michigan has fewer constraints on durable power of attorneys, but one must wonder why and for how long this may be the case. A durable power of attorney is a dangerous document for a variety of reasons and recording the document and any subsequent revocation makes some sense. This is the law in Florida, where it is arguably necessary to have a more fully developed body of law on the subject. Michigan’s comparatively lax standards may need to be tightened as the state’s population ages and the issues common enough to reach the attention of our legislators.

A power of attorney is only effective to the extent that it is accepted by institutions. Home made documents or free documents from the internet may raise enough suspicion that an institution will not accept them.

The nightmare scenario that I can imagine with a free power of attorney or any document is that it might not work for some reason. Irregularities with the signatures or imperfections in the enumerated powers could cause a document to by rejected at a critical time. And at that point the family will find themselves heading to probate court and paying hourly for an attorney’s services.

The process is of applying for Medicaid long term care assistance can be somewhat difficult. The documentation requirements can be voluminous and the process will typically take at least 45 days. I have seen several recent cases take as long 4 months to be approved.

Various Medicaid Applications can be found here. Even a brief glance at this page will show the breadth and complexity of the many programs and types of assistance available.

If you are looking for the application for a patient in a nursing home, it is DHS-4574. If a married person is applying on behalf of his or her institutionalized spouse, it is also necessary to file an Asset Declaration, which is form DHS-4574B.

It is important to recognize that the Asset Declaration is used by the Department of Human Services to look at assets as of the first day the institutionalized spouse entered the hospital or nursing home. This date is called the “snap shot date.” It is the baseline used to determine how much the non-institutionalized spouse will be able to keep. For example, a couple with $150,000.00 in countable assets as of the snap shot date will qualify for Medicaid when their combined assets are reduced to $75,000.00. An elder law attorney will help the couple to reduce the countable assets as quickly as possible while preserving the value of those assets. In many cases, the entire amount over the limit can be preserved for the benefit of the spouse at home with proper advice.