Elder Rights Conference July, Janna Dutton, Partner Dutton & Casey, PC. Offices in Chicago, Skokie, Arlington Heights, and Vernon Hills

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1 Elder Rights Conference July, 2011 Janna Dutton, Partner Dutton & Casey, PC Offices in Chicago, Skokie, Arlington Heights, and Vernon Hills Main Phone Number:

2 Standards of Capacity In Illinois, a presumption exists that persons of a mature age are sane and have the mental capacity to contract. As long as the party in question can understand the nature of the transaction and protect his or her interests, the court will find him or her mentally competent and validate the transaction Capacity to contract is the mental ability to appreciate the nature of one's actions Powers of Attorney are contracts

3 Standard of Incapacity for Guardianship A court will appoint a guardian when: 1. A person is disabled due to mental deterioration, physical incapacity or development disability; and, 2. That person is totally incapable of making and/or communicating decisions regarding his personal or financial affairs due to his disability; and, 3. Guardianship is necessary to promote the wellbeing of the disabled person and/or to protect him from neglect, exploitation, or abuse

4 Guardianship Procedures Filing Petition for Appointment of Guardian Service of Summons Appointment of Guardian ad Litem Obtaining necessary Physician s Report ( In Cook County, CCP 211) Notice to spouse, children, siblings and agents under power of attorney

5 Uncontested Guardianship Based upon the Report of the Guardian ad Litem Must present Original Physician s Report Proposed Guardian must present Oath and Bond Proposed Guardian should be present to present Care Plan

6 Contested Guardianship Based upon the Report of the Guardian ad Litem (stating respondent objects and wants attorney) OR based upon a Cross-Petition Rules of Discovery apply (Interrogatories, Depositions) Parties may ask for mental exam of respondent Respondent may ask for jury trial Expensive; usually, if guardian appointed fees are paid from Estate

7 Guardianship vs. Power of Attorney Guardian will not be appointed if valid power of attorney is in place Before a Guardian is appointed, agents under power of attorney must resign or the court must revoke the power of attorney Proceeding to have power of attorney revoked is subject to full discovery and trial, can be expensive

8 Powers and Duties of the Guardian of the Estate the care, management and investment of the ward s estate. disburse the ward s funds Comfort and support of ward, minor children, adult dependent children and spouse exercise any or all powers over the estate and business affairs of the ward that the ward could exercise if not under disability. appear for and represent the ward in all legal proceedings. engage in estate planning for the ward. duty to carry out the ward s wishes as best as they can be ascertained. duty to file annual accountings of the estate with the court.

9 Powers and Duties of the Guardian of the Person custody of the ward and the ward s minor and adult dependent children. authority to choose the ward s placement and to place a ward in a residential facility with the court s approval. right to control who can and cannot visit the ward. duty to make provisions for their support, care, comfort, health, education, maintenance and professional services. all rights of a surrogate under the Health Care Surrogate Act to make decisions to forgo or withdraw life-sustaining treatment.

10 Guardianship v. Powers of Attorney Guardianship of the Estate finding of legal incompetence ward cannot enter into contracts guardian has all powers under the statute guardian must post a surety bond Power of Attorney for Property no finding of legal incompetence principal can still enter into contracts agent has only those powers specified in the document agent is not insured with a surety bond

11 Guardianship v. Powers of Attorney Guardianship of the Estate guardian is supervised by the court guardian must file annual accountings with the court ward cannot revoke the guardianship without Power of Attorney for Property agent is not supervised by a court agent must keep records but does not need to submit an accounting to a court unless ordered to do so principal can revoke the agency without the court finding him legally competent

12 Guardianship v. Powers of Attorney Guardianship of the Person ward can no longer vote guardian can control the ward s placement even over the ward s objection guardian can control who visits the ward Power of Attorney for Health Care principal can still vote agent has no authority to control the principal s placement over his objection agent cannot control who visits the principal

13 Guardianship v. Powers of Attorney Guardianship of the Person ward cannot file for divorce guardian can keep home care in the home over the ward s objection Power of Attorney for Health Care principal can still file for divorce principal cannot keep home care in the home over the principal s objection

14 Trusts Established by a transfer of property to yourself or to another person to hold for your benefit. The powers and responsibilities of a trustee Similar to those of an agent under a Power of Attorney for Property Controlled and limited by the terms of the trust document. Example: Eliza transfers her house and her brokerage account to herself as trustee of the Eliza Living Trust. In the trust document, Eliza designates her son, Elliot, as successor trustee if she becomes disabled.

15 Trustees v. Agents under Powers of Attorney v. Guardians of the Estate Trustees Agents under Powers of Attorney Estate Guardians No authority over nontrust assets generally, no authority over trust assets no authority over trust assets only has those authorities specified in the trust document only has those authorities specified in the Power of Attorney Document has all authorities under the statute no surety bond no surety bond must post a surety bond no court supervision no court supervision court supervision

16 Trusts as Disability Planning Tools Good disability tool: If trustworthy individual or corporate fiduciary is named as trustee If all assets are transferred to trust before disability. To protect finances after disability No authority or protection over personal affairs. Guardianship Court has no jurisdiction over Trusts

17 Common Trust Disability provision 2.2 Determination of Incapacity. I shall be incapacitated if I am under a legal disability or am unable to give prompt and intelligent consideration to financial affairs. (a) Written Determination. The determination of my inability shall be made in writing, signed by my personal physician and my children who are then living and able to so act, and delivered to the trustee. The trustee may rely conclusively on that writing.

18 Undue Influence Undue Influence as psychological phenomenon Undue influence occurs when one person (an abuser) uses his role and power to exploit the trust, dependency, and fear of another. The abuser uses his or her power and influence to deceptively gain control over the decision making of the other person effectively replacing the will and decisions of the victim with the will of the abuser. Undue influence is a characteristic of a relationship where the abuser gains financial benefits by influencing the victim

19 Undue Influence as Legal Action When a gift is made by one to another who owes a fiduciary duty to the donor, that gift is presumptively fraudulent and the presumption can be overcome only by clear and convincing evidence. i.e. where a person is acting as power of attorney and benefits from a gift or other transaction with the principal, the transaction is presumptively fraudulent. Fiduciary Relationship in law, i.e. agent under power of attorney, physician, accountant, attorney OR in fact, disparity in age, close relationship, trust, dependence i.e. caregiver, adult child assisting parent.

20 Undue Influence & Guardianship Guardianship as a remedy for Undue Influence Victim must meet guardianship standards must have a mental deterioration which affects decision-making ability.

21 Presented by: Janna S. Dutton Dutton & Casey, P.C. 21

22 Medicaid Federal State Program Federal Law and Monitoring State Law Regulations and Policy State Medicaid Agency Illinois Department of Healthcare and Family Services State Eligibility Determinations Illinois Department of Human Services 22

23 Illinois Medicaid Covered Long Term Care Nursing homes Supportive living- Waivered Community care program (over 60) Waivered In-home services (under 60) Waivered 23

24 Medicaid Eligibility Residency and Citizenship Categorical eligibility Need 24

25 Residency Only residents of Illinois are eligible for Illinois Medicaid. Voluntarily living in Illinois No durational requirement Intention to remain in Illinois If an individual maintains a home in another state, Illinois residency may not be established. 25

26 Citizenship Only U.S. Citizens or lawful aliens eligible for Medicaid Lawfully admitted for permanent residency; or Permanently residing in the United States under color of law. 26

27 Categorical Eligibility Under current law, for an individual to be eligible for Medicaid, must be categorically eligible: Aged, blind or disabled; Child; Caretaker of eligible child. Additionally, the individual must meet strict financial requirements. 27

28 Medicaid Eligibility Asset Limitations Exempt assets: $2000 asset disregard Homestead Property if: intend to return; occupied by spouse; siblings; minor or disabled child but under proposed rules equity must be $750,000 or less or not exempt unless occupied by spouse, minor or disabled child. Personal Effects or Household Good Motor Vehicle necessary for medical transportation, modified for handicap, transferred to community spouse, or worth less than $4500 Life Insurance Burial Funds Burial Space and Merchandise 28

29 Joint Assets Joint accounts and personal property Presumption is 100% belongs to applicant Joint real estate Life estate Life estate may be subject to lien Change: funds used to purchase life estate will be considered to be non-allowable transfer of assets unless the purchaser resides in the home for a period of at least one year after date of purchase 29

30 Annuities Current Regulations The purchase of an annuity is allowable if it pays out in approximately equal periodic payments over the term of the annuity and the amount used to purchase the annuity will be paid back over the life expectancy of the applicant using the Department s Life Expectancy Tables. If allowable, the annuity is treated as income, not an asset. 30

31 Annuities Proposed Regulations In addition to the current regulations: -State must be named remainder beneficiary; -Applies to annuities purchase by applicant or spouse; and -Retirement annuities excepted from above rules except perhaps requirement that State be named remainder beneficiary which is unclear. 31

32 Income Eligibility To qualify for Medicaid coverage, the nursing home or supportive living resident s countable monthly income must be less than the nursing home s monthly private pay rate. Different income rules apply to the Community Care Program. Income in the community spouse s name is not considered available to the nursing home spouse from the first full month in which the nursing home spouse is institutionalized. Name on the instrument rule 32

33 Allowable Deductions from Income of Nursing Home Medicaid Recipient 1. Personal needs allowance ($30 for Nursing Home residents/$90 for Veterans) 2. Community Spouse Income Allowance 3. Family Maintenance Needs Allowance 4. Maintenance for Dependent Children under 21 not residing with community spouse 5. Amounts to cover Medicare and other health insurance premiums 6. Amounts to cover over the counter drugs or other medically necessary items ordered by a physician but no paid for by Medicaid and amounts to cover incurred expenses for medical or remedial care for the institutionalized spouse not paid for by Medicaid. Proposed Change: Expenses limited to those incurred within the 6 months prior to the month of an application if a current liability. Medical expenses incurred during a penalty period not allowable. 7. Amounts to maintain a home in the community if a person who has no spouse or dependent children at home is admitted to a facility for what is expected to be a six months or less. Proposed Change: Physician has certified that the individual is expected to return home within six months. Amount of the deduction is based upon the AABD MAG standard. 33

34 Community Spouse Maintenance Needs Allowance The community spouse is able to receive a contribution from the nursing home spouse's income to bring his or her total monthly income up to the amount of a predetermined monthly needs allowance, $2,739 in 2010 There are provisions for annual adjustments of this figure like the asset figure that is tied to the consumer price index of the previous year. Community spouse or nursing home spouse may request a fair hearing to establish a greater amount of maintenance allowance. For instance, if regular heath care costs exceeding $2,739 per month can be proven at a fair hearing to increase the needs standard, the allowance from the nursing home spouse's income may be increased. Additionally, if the community spouse has a court order for support or maintenance which, in combination with the community spouse's income, exceeds the $2,739 standard, IDHS must abide by the court order. Proposed Changes: To received an increased amount of maintenance, the community spouse must prove that exceptional circumstances result in significant financial distress which means recurring or extraordinary medical expenses, amounts necessary to preserve, maintain or make major repairs to homestead property, or reasonable amounts necessary to preserve an income producing resource subject to the limitations of Section (a)(3). 34

35 Community Spouse Asset Allowance Current rules: Standard allowance -calculated by subtracting community spouse s separate nonexempt assets from standard of $109,540 Community Spouse separate assets do not count towards eligibility of nursing home spouse but count for calculation of asset allowance Responsible relative liable for payments to state if income exceeds maintenance needs allowance ($2739 in 2011) as reflected on Federal income tax return. Increased asset allowances Court orders 35

36 Community Spouse Asset Allowance Current rules cont. Increased Asset Allowance by Appeal Hearing Based upon community spouse s separate income; Increase in Asset Allowance measured by the cost of an actuarially sound single premium life annuity that when added to the community spouse s income will be sufficient to raise the CS s income to the standard ($2739/month in 2011). 36

37 Community Spouse Asset Allowance Current rules cont. Increased Asset Allowance by Court Order Court approved transfers of income-producing assets to the community spouse in an amount greater than the standard CSAA are allowed 37

38 Community Spouse Asset Allowance Proposed rules: Standard allowance remains the same Refusal/assignment the CS s separate assets will count as available to the NH spouse for purposes of eligibility. Responsible relative payments remains the same Increased asset allowances will use Income First Rule and will count the standard CSAA as part of the increased allowance Court orders assets transferred to CS for support by court order allowed 38

39 Major Differences Between Old and New Spousal Impoverishment Rules CS assets count towards NH spouse Medicaid eligibility:prenuptial Agreements irrelevant - all assets count; CS refusal - NH may be determined eligible provide he/she Assigns right to spousal support to the State. State allowed to legally pursue CS for support; (somewhat unclear) Assignment of Support Rights State may pursue CS for payments from income and for other support; Income First Rule for increased asset allowance 39

40 Example Present vs. New Regs Mary married Tom at the young age of 20, and the two have been married 50 years. Tom is now age 82 and Mary age 70. Tom was diagnosed with Alzheimer s disease at age 75. Mary has struggled to keep him at home, and took the advice of friends at her Alzheimer s support group and several years ago transferred all their assets, consisting of approximately $180,000 in bank accounts, their home and a car, into her name alone. Tom and Mary receive monthly social security benefits of $1350 and $750 respectively, for a total combined monthly social security income of $2100, and apart from interest income on their accounts, receive no other income. At Tom s death, Mary s total social security income will be $1350, as she will be able to retain only the higher of the two social security checks. Tom recently deteriorated so that he is no longer able to walk, and has become incontinent. Mary is no longer able to continue caring for him at home, and is seeking nursing home care. 40

41 Transfer of Assets Rules Current Regulations 36 month look back except 60 month for transfers to an irrevocable trust or from a revocable trust Penalty period calculated for each month in which nonallowable transfer occurred by dividing amount transferred by monthly cost of nursing home care Penalty period starts the month of the transfer; multiple penalty periods run consecutively Historically state allowed partial cures reducing penalty if some of the funds returned to applicant 41

42 Transfer of Assets Rules Proposed Regulations 60 month look back ( Second Publication 11/1/2008) New rules applicable to all transfers occurring on or after February 6, 2006 (11/1/2008) Penalty period calculated for each month in which nonallowable transfer occurred by dividing amount transferred by average cost of nursing home care Penalty period measured in months and partial months/days. 42

43 Transfer of Assets Rules Proposed Regulations, cont. Penalty period starts the month that the applicant is receiving a long term care level of care and is eligible for Medicaid based upon an application but for the application of the penalty period; multiple penalty periods run consecutively No partial cures penalty reduced only if the entire amount transferred is returned to applicant 43

44 Example Transfer of Assets Rules Mary, an 80 year old, in June of 2006, decided she wanted to make gifts to her five grandchildren of $12,000 each, for a total of $60,000. She was aware that for purposes of Medicaid eligibility for long term care that there was a 36 month look back, or, as she understood it, she could not receive Medicaid benefits for the 36 months following the gift. Again in January, of 2007, she made another $12,000 gift to each of her grandchildren, for another $60,000. At the time, Mary believed she had sufficient assets to pay for three years of long term care. In February of 2007, Mary entered a nursing home and she began using her assets to pay for her care. In February of 2011, Mary s assets will be exhausted and she will apply for Medicaid. Under regulations in effect as of June of 2006 and February 2007, Mary would be eligible for Medicaid coverage if she is otherwise eligible based upon her February 2011 application. The gifts she made to her grandchildren would not affect her eligibility under the regulations in effect at the time she made the gifts. Under proposed rules? 44

45 Transfers of Assets Rules example cont. Under the proposed regulations the Department intends to apply the newer, more punitive transfer rules to all transfers occurring on or after February 8, Under the new regulations, the combined transfers Mary made in 2006 and 2007 will result in a penalty period of approximately 20 months (assuming a private pay rate of $6000) and will begin in February of 2011, at the time her assets are exhausted and she is otherwise eligible for Medicaid. Under proposed regulations, the only way that the penalty period of ineligibility for Medicaid could be reduced is if her grandchildren returned the entire amount of the combined gifts. Mary will then have no way of paying for her necessary nursing home care. 45

46 Allowable Transfers Current Rules 1. Transfers of exempt homestead property to: a spouse, minor child, disabled adult child, sibling with an equity interest residing in the property, or child who lived with applicant and provide care or support for years prior to nursing home admission 2. Transfers of the Community Spouse Asset Allowance to or for the benefit of the Community Spouse, and transfers of personal effects, household goods, and one motor vehicle to the Community Spouse. 3. Transfers to a blind or disabled child of any age or to a trust created solely for the benefit of the disabled child. 4. Transfers by a disabled person under age 65 to an OBRA Pay Back Trust or transfers by a disabled person of any age to an OBRA Pooled Trust subaccount. (Current law - may change as to persons over age 65) 5. Transfers where it is determined that a denial of eligibility would create an undue hardship. 6. Transfers made exclusively for a reason other than to qualify for benefits. 7. Transfers to a Community Spouse that were result of a court order. 8. Transfers that are returned to the person.

47 Allowable Transfers of Assets Proposed Rules Changes to allowable transfers under proposed rules Transfers of homestead to 2 yr, live-in caregiver child: Need physician s statement as to why personal or home health services required during 2 years; Need statement of specific services provided, hours per day, arrangements while child working, payments to third party caregivers, etc.; Statement from unrelated third party with knowledge of services provided. Transfers to disabled child or person for sole benefit standard requires payout during lifetime 47

48 Medicaid Rules and Payments to Caregivers Personal Care Contracts must be established prior to the receipt of services. Services must be clearly identified and reimbursed consistent with the prevailing cost in the service area. Transfers for love and affection are not considered transfers for fair market value.

49 Promissory Notes The purchase of a promissory note, loan or mortgage by an applicant is considered a transfer of assets unless: A written instrument recording the transaction is executed, signed an dated on the effective date of the transaction; Repayment term is actuarially sound; Instrument provides for payments to be made in equal installments with no deferral or balloon payments; Instrument prohibits cancellation; and There is verifiable record of consistent, timely payments of amounts due under the Note. (Delinquency of 3 months or more results in the loan being considered nonallowable.) 49

50 Hardship Waiver The Department may waive a penalty period or portion of a penalty period if it determines the penalty causes undue hardship defined: Deprivation of medical care, food, clothing, shelter; Does not apply if person transfers or gifts property for purpose of qualifying for Medicaid; Does not apply if person transferred assets to community spouse and spouse refuses to cooperate; Person requesting waiver has burden of proof of actual hardship. 50

51 Miscellaneous Proposed Changes Retroactive eligibility must prove eligibility in each of three months of retroactive eligibility. Currently presumed. Asset transfer rules will apply to persons living in Community Integrated Living Arrangements. Assets considered available when the person has the lawful power to cause the resource to be available. (although not actually easily available i.e. requires lawsuit to be filed) 51

52 Medicaid Treatment of Trusts Self Settled (or by spouse) Revocable Trusts - commonly known as Living Trusts Count as an asset Self Settled (or by spouse) Irrevocable Trusts Whatever amounts that the trustee may use for the benefit of the Medicaid applicant is presumed available; if can use any principal, all available Third -Party Trusts Do not count if discretionary ; Count if can be used for support, health and maintenance OBRA Payback Trusts Do not count if meet all requirements 52

53 OBRA Individual Payback Trust Requirements 1. Irrevocable 2. Established by parent, grandparent, court or guardian 3. Beneficiary under age 65 and disabled 4. Any state which paid out Medicaid benefits on behalf of beneficiary is paid back at the death of the beneficiary before any other payment except taxes and reasonable expenses of administration. 5. If proceeds of trust are from personal injury action, the Department lien must be paid off before transferring the proceeds to the trust. 53

54 OBRA Pooled Trust Subaccount Requirements 1. Irrevocable 2. Established by parent, grandparent, court or guardian or the beneficiary him or herself. 3. Beneficiary disabled (may be over 65) 4. Payback to any State providing Medicaid unless retained by the Trust 5. If States are paid back at the death of the beneficiary must be before any other payment except taxes and reasonable expenses of administration. 54

55 Locations : Advocates for Elders, Persons with Disabilities, and Their Families Attorneys: 100 W Monroe Street, #810 Janna Dutton Chicago, IL Kathryn C. Casey Phone: Melissa Howitt Lara A. Duda 9933 N. Lawler Rd., #440 Skokie, IL Client Care Coordinator: Phone: Erin C. Vogt, LCSW, ACSW, CCM 1665 N. Arlington Hts Road, #306 West Arlington Heights, IL Phone: Vernon Hills Opening in Summer

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