In Part 1 of this series I mentioned that 60% of us will need long-term care at some point in our lives. When this statistic is put in perspective with the relatively low likelihood of making an automobile or homeowner’s claim, the risk that you or I will need long-term care at some point in the future is shocking. Yet, the majority of Americans are either unaware of these statistics or refuse to plan for the often catastrophic costs of long-term care. Part 1 of this series outlined the necessity to create a good Long-Term Care Plan in addition to, or as part of, your Estate Plan; Part 2 will now discuss the three most essential documents found in a good Long-Term Care Plan, as well as two additional documents that are often also part of a Long-Term Care Plan.

General Power of Attorney
A General Durable Power of Attorney (POA) containing Asset Protection Powers is the first essential document. Not all POA’s are created equal; it is crucial that this document be prepared by a knowledgeable and experienced Elder Law Attorney. One way to ensure the qualifications of your attorney is to look for one who is Certified as an Elder Law Attorney by the National Elder Law Foundation, the only organization accredited by the American Bar Association to certify lawyers in the specialty area of Elder Law. For a list of Certified Elder Law Attorneys, please visit http://www.nelf.org/findcela.asp.

A POA (always “durable” when used in connection with estate planning and long-term care planning) authorizes your “Agent,” sometimes called an “Attorney in Fact,” to act on your behalf and sign your name to legal and financial documents. It is an essential tool in the event that, due to age, illness, or injury, you are unable to carry on your legal and financial affairs. Asset Protection Powers written into the POA are essential in order for your Agent to protect your assets from the often-catastrophic expenses of long-term care. Attorneys who are not experienced Elder Law Attorneys often fail to put these essential Asset Protection Powers into the POA.

A properly-drafted POA is designed to avoid the need to go through a court-supervised conservatorship proceeding, which is a time consuming, expensive, and publicly embarrassing process whereby someone goes to court to have you declared incompetent and to be appointed as your Conservator. The Conservatorship process is often referred to as a type of “living probate” because the Conservator is subject to all the rules of the probate court, including the onerous requirement of filing annual accountings with the Court. State laws vary regarding the use and acceptance of a power of attorney.

An AMD (also called a Medical Power of Attorney or a Health Care Power of Attorney) authorizes another person (called your “Medical Agent”), to make decisions with respect to your medical care in the event that you are physically or mentally unable to do so. This document includes the type of provisions that used to be in what was commonly called a “Living Will,” allowing you to indicate your wishes concerning the use of artificial or extraordinary measures to prolong your life in the event of a terminal illness or injury. In the AMD you will also appoint a “Medical Agent” and give that person the power to consent to medical and health care decisions on your behalf with regard to providing, withholding, or withdrawing a specific medical treatment or course of treatment when you are incapable of making or communicating an informed decision on your own behalf. A comprehensive AMD will also allow you to indicate your wishes with regard to organ donation, disposition of bodily remains, and funeral arrangements.

A properly-drafted AMD is designed to avoid the need to go through a court-supervised guardianship proceeding, which is a time consuming, expensive, and publicly embarrassing process whereby someone goes to court to have you declared incompetent and to be appointed as your Guardian, typically at the same time they are requesting appointment as your Conservator.

In order to be easily accessible when needed, your AMD should be registered with an electronic archive service that can immediately fax the document to any desired destination. Some Elder Law Attorneys, including our firm, provide such registrations to clients at no charge.

As an example, Alice wrote in her Advance Care Plan that if Alzheimer’s disease or some other type of dementia inhibited her mental abilities to communicate or recognize her surroundings, she wished to be in a respectable facility and only asked that she be visited and brought chocolates. To her children this request seemed silly at the time, but when her mental capacities did diminish, the instructions were there. No one had to wonder if they should try to take care of Alice at home and how they would do it. Without guilt or question they placed her in a respectable facility that took care of her needs. All they had to do was make loving visits, and of course they brought chocolates.

Because of the importance of the Advance Care Plan, the Farr Law Firm provides one to all of our clients as part our comprehensive Long-Term Care Planning services. To learn more about the benefits of having an Advance Care Plan, please click here or visit our Web site at: www.farrlawfirm.com/advance-care-plan.htm

Living Trusts
A good Long-Term Care Plan will always include the three documents mentioned above, and will typically also include a Living Trust — either a Revocable Living Trust (RLT) or an Irrevocable Income-Only Trust (IOT).

An RLT generally provides for the creator of the trust to have full use of the trust income and principal for life. On the death of the creator, the assets may continue to be held in trust (or may be distributed) for the benefit of the named beneficiaries, such as the grantor’s children. Although the most important benefit of the RLT is to avoid probate, a well-drafted RLT also can help protect from incapacity and can therefore be an important part of a Long-Term Care Plan. Similar to a General Power of Attorney, an RLT can provide uninterrupted management of your assets by your trustee if you become incapacitated, sparing you and your family from having to go through the expense and complexities of a court-appointed conservatorship. It is important to note that an RLT does not protect your assets from the expenses of long-term care. On the contrary, the assets in an RLT must be spent, if necessary, in providing long-term care, even if that means spending down all of the assets in the RLT to provide such care. For more information on RLTs, please click here or visit our Web site at: www.farrlawfirm.com/revocable.html

 An IOT is a living trust that is designed to protect your assets from the expenses and difficulties of probate and also protect your assets during your lifetime from a multitude of other financial risks, including the threat of lawsuits, auto accidents, creditor attacks, extended hospitalization, and — most importantly – the catastrophic expenses associated with nursing home care. Part 4 of this series will explore the IOT in detail.

The Farr Law Firm specializes in long-term care planning and we would be happy to assist you in your preparations. Please visit us at www.virginiaelderlaw.com or call 703-691-1888.

While there are many “do-it-yourself” Power of Attorney forms available, you should consider having an elder law attorney draft this document for you, because there are many significant issues to consider. One size does not fit all.

The Agent’s Powers

The Power of Attorney sets out your Agent’s powers in detail. These powers are typically limited to buying or selling property, managing a business, paying debts, investing money, engaging in legal proceedings, borrowing money, cashing checks, and collecting debts. However, if you want to ensure that your Agent has the authority to do Medicaid planning on your behalf (because you are not able to do so yourself), then the Power of Attorney should also include the power to make gifts and uncompensated transfers, as well as the power to designate beneficiaries of your insurance policies and retirement plans. Using the gifting power to fund a trust and designating different beneficiaries are two extremely important strategies your Agent might need in order to do effective Medicaid asset protection on your behalf.

In Virginia, if a power is not specifically listed on the Power of Attorney, then the usual interpretation is that the power is not granted. The power to make gifts of your money and property is a vitally important aspect of Medicaid planning. If you want to ensure that your Agent has the widest possible range of powers to do Medicaid planning on your behalf to protect your assets if you must enter a nursing home, then your Power of Attorney must give your Agent the power to make or modify trusts, make gifts, and designate beneficiaries. These advanced powers are almost always lacking in “off-the-shelf” Power of Attorney forms, which is why it is so important to consult an elder law attorney.

Springing or Immediate

The Power of Attorney can take effect immediately or it can become effective only if you become incapacitated or disabled – the latter is called a “springing” Power of Attorney. While a springing Power of Attorney may seem like a good idea, it can cause delays and extra expense because your incapacity must be determined and verified (usually in writing) before your Agent may act. If you wish to sign a springing Power of Attorney, it is very important that the method for determining incapacity be clearly spelled out in the document.

Joint Agents

While it is possible to name more than one person as your Agent, this can lead to confusion. If you wish to name more than one person, the document should clearly specify whether all of your Agents must act together (all of them must sign checks, contracts, and the like) or whether each may act independently. It might make more sense and be less confusing to name a primary Agent, and one or more alternate Agents who may act if your primary Agent is not available.

Executing the Power of Attorney

To be valid and acceptable, your Power of Attorney must also be executed properly. Some states require only a signature, but most require that a Power of Attorney be notarized. Many states require witnesses. It is important to consult with an elder law attorney in your state to ensure your Power of Attorney is executed properly, so that it will be accepted by financial institutions.

Accepting a Power of Attorney

Even if you do everything correctly, some banks and other financial institutions are reluctant to accept a Power of Attorney over a year old. These institutions are afraid of a lawsuit if the Power of Attorney is no longer valid. The Farr Law Firm offers an Estate Plan Protection Program, which encourages you to meet with Mr. Farr for a short “legal check up” each year to assess your entire estate plan and to sign new Powers of Attorney and Advanced Medical Directives, ensuring that your documents remain current.