Fong Law Group

Notarizing Documents for Seniors With a Dementia Diagnosis

An Alzheimer’s or dementia diagnosis can be a challenging journey for the person and family alike. When the diagnosis occurs, a ticking clock begins on the timeline for getting proper and sound notarizations done for crucial legal documents.

What Does It Mean to Get a Document Notarized?

According to the National Notary Association, having a document notarized is a process that ensures the document is authentic. The Notary serves as an impartial screener who confirms the identity, willingness, and awareness of the person signing the document.

There are vital issues and implications to be aware of when having documents notarized for individuals with dementia.

Notarizing for a Person With Dementia: A Legal Gray Area

Having documents notarized for seniors with dementia leads to some legal gray areas. There are no laws that prohibit having documents notarized for individuals with cognitive impairments. However, the role of a Notary Public extends beyond the procedural formalities.

Notarizing documents for anyone who is cognitively impaired also comes with a dramatically increased risk for both fraud and elder abuse. This is an issue that Notaries are highly aware of and protect against.

Notaries must assess whether their document signers understand and are aware of the nature of the documents, their contents, and their details. They also must verify the signer’s identity.

Notaries must screen each signer to ensure they are signing the document willingly. The signer cannot be under the pressure or direction of any third party.

The Notary will refuse to notarize a document if they find that any of these conditions fail to meet the standard.

It’s critical for families to act ethically and responsibly in notarizing important documents for their aging loved ones with dementia. If your loved one is facing a dementia diagnosis, establish legal clarity as soon as possible to avoid uncertainties later.

How to Prep When Having Documents Notarized

The following tips will help you prepare:

• Make sure the Notary visits the signer at a time when they are cognitively aware.
• Arrange for the signer to meet privately with the Notary.
• Confirm what type of notarization you need on specific legal documents. If you need anything clarified, check with your attorney or the document recipient.
• Ensure the signer is prepared to present their identification. They also must be able to sign the document, if necessary, as well as the Notary’s record book. Some states also require a fingerprint impression.
• Ensure there are no blank spaces or dates on the documents. To combat fraud, a Notary will refuse to notarize if required entries are blank.

Legal Documents to Have Notarized for Dementia Diagnosis

Certain legal documents, more commonly notarized for seniors, serve the person’s wishes and protect them from undue influence. Those documents include the following:

Power of Attorney (General vs. Durable)

A power of attorney grants authority to a trusted individual to make financial and legal decisions on behalf of someone else. A general power of attorney is effective immediately. In contrast, a durable power of attorney remains in effect even if the signer becomes unable to handle their affairs.

Health Care Power of Attorney

This document designates a representative to make medical decisions when the individual is unable to do so. You may also hear it referred to as a health care proxy. Notarizing it ensures that all parties will respect the signer’s health care preferences.

Living Will

A living will outlines end-of-life medical preferences. Having it notarized provides assurance that medical choices align with the signer’s wishes.

Guardianship/Conservatorship

In cases where dementia has advanced significantly, establishing a legal guardian or conservator for your loved one. In securing notarized documents, you can ensure that the guardian responsibly manages your loved one’s financial and personal affairs.

Will or Trust

Notarizing a will or trust guarantees the proper distribution of assets after your loved one’s passing, minimizing potential disputes.

HIPAA Release Form

A HIPAA release form grants specific individuals access to the signer’s medical information, aiding health care decisions.

Financial Account Designations

You may also want to ensure that all parties will handle your loved one’s financial matters according to their preferences. To do this, you can work with a Notary to notarize designations on your loved one’s financial accounts.

Act Before It’s Too Late

The absence of specific laws surrounding notarial acts and dementia highlights the importance of being proactive. Waiting until the last moment to have something notarized may lead to legal difficulties or disputes.

As soon as you receive confirmation of your loved one’s dementia diagnosis, initiate the process of having key legal documents notarized. It’s essential you do this while your loved one can still articulate their wishes. This way, you can help protect them while reducing potential family conflicts.

What Are Medicaid Asset Protection Trusts?

Medicaid imposes strict rules on how much money and assets an applicant can have. To qualify for Medicaid, you must fall under the asset limit, which is $2,000 in most states.

Even with greater than $2,000 in assets, however, you may be able to get on Medicaid by establishing a Medicaid Asset Protection Trust (MAPT). When you put your assets in a MAPT, Medicaid will not count the money in the trust toward its resource limit.

Using Medicaid Asset Protection Trusts to Transfer Assets

After you create a Medicaid Asset Protection Trust, you no longer own the assets within it, allowing you to qualify for Medicaid following the five-year lookback period. People who are currently healthy but plan to go on Medicaid in the future might choose to use this Medicaid planning strategy.

It is essential to understand that MAPTs are irrevocable: Once you make the trust, you cannot change your mind and take those assets back. Your trust must be irrevocable for you to qualify for Medicaid because it means that you no longer own or control these assets.

In contrast to MAPTs, many types of revocable trusts, such as family trusts, are often ineffective in preparing for Medicaid. Having the power to revoke your trust would allow to retain control over your assets, and Medicaid would count the contents of your trust as part of your resources.

Creating a Medicaid Asset Protection Trust

Three parties are involved in a MAPT: the grantor, the trustee, and the beneficiary. When you make a trust, you become the grantor, the person who places assets into the trust. The trustee manages the trust, and the beneficiary — or beneficiaries — will receive your assets.

If you want your MAPT to ensure you qualify for Medicaid, you must name someone other than yourself or your spouse as the beneficiary. Designating yourself as the beneficiary would mean giving yourself assets, which Medicaid would count toward its asset limit.

You can, however, select your children or parents as beneficiaries. Using a MAPT, you can also make sure they get those assets when you pass away.

What Can You Place in a Medicaid Asset Protection Trust?

As part of your Medicaid planning strategy, you can place many types of assets in a MAPT, including:

• Checking and savings accounts
• Stocks and bonds
• Mutual funds
• Certificates of deposit
• Real estate that is not your primary residence
• In most states, your home

Although many states allow you to place your home in MAPT so that it will not count toward Medicaid’s resource limit after five years, Medicaid regulations vary by state. In Michigan, for example, placing your home in a MAPT will not prevent it from counting toward the asset limit.

Benefits and Drawbacks of Medicaid Asset Protection Trusts

Medicaid Asset Protection Trusts offer several benefits to individuals planning to apply for Medicaid:

• MAPTs preserve generational wealth, safeguarding assets for family members.
• After you pass away, the state cannot take your assets from your beneficiaries to reimburse them for your long-term care, as MAPTs avoid probate.
• Since nursing home fees can be exorbitant, MAPTs can save your family money, as they let you qualify for Medicaid once the lookback period has ended.

The drawbacks of MAPTs include the following:

• Once you establish a MAPT, you forfeit the control and use of your assets. If you need money, you will not be able to draw from the trust.
• The fees associated with preparing a MAPT can be costly, ranging from $2,000 to $12,000.

Speak with your attorney to learn about how using a Medicaid Asset Protection Trust could help you plan for your future.

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Britney Spears Case Puts Renewed Focus on Guardianships and Less Restrictive Alternatives

Britney Spears’s legal fight to wrest back control over her personal and financial affairs has flooded the issue of guardianship in Klieg lights. While a full guardianship may be necessary for many individuals who are incapable of managing their own affairs due to dementia or intellectual, developmental or mental health disabilities, the Spears case underlines the option of more limited alternatives.

Every adult is assumed to be capable of making his or her own decisions unless a court determines otherwise. If an adult becomes incapable of making responsible decisions, the court will appoint a substitute decision maker, usually called a "guardian" or a "conservator," depending on the state.

Guardianship is a legal relationship between a competent adult (the "guardian") and a person who because of incapacity is no longer able to take care of his or her own affairs (the "ward"). The guardian can be authorized to make legal, financial, and health care decisions for the ward. The National Center for State Courts says that about 1.3 million adults are living under guardianships or conservatorships with some $50 billion in assets.

The standard under which a person is deemed to require a guardian differs from state to state, and because guardianships are subject to state law, data on them is hard to collect and protections against abuse vary widely.  Netflix’s popular movie, I Care a Lot, spotlighted some weaknesses in the guardianship system that make it possible for an unscrupulous guardian to take control of an elderly person’s life and bleed their resources dry. 

The Spears Case: An Unusual Situation

Britney Spears has been under a court-ordered conservatorship that has controlled her career and finances since 2008. Her father, Jamie Spears, was appointed her temporary conservator when the pop singer was allegedly struggling with mental health issues and had been hospitalized, and a Los Angeles court later made the conservatorship permanent.

On July 14, a Los Angeles judge approved the resignation of Spears’s court-appointed lawyer and granted her request to hire her own lawyer. The 39-year-old singer told the judge that she wants to end the long-running conservatorship that put her father in charge of her estimated $60 million fortune and business affairs, and others in control of such personal decisions as whether she can marry and have a baby. "I'm here to get rid of my dad and charge him with conservatorship abuse," she said.

Whatever the merits of this controversial case, what makes Spears's situation so unusual is the fact that she does not appear to be incompetent, at least when it comes to her professional accomplishments. In the 13 years since the conservatorship was put in place, she has continued her career as a pop star, earning millions from a four-year concert residency act in Las Vegas and serving as a judge on the television reality show “The X Factor.”

Another anomaly is the fact that until now Spears was represented by a court-appointed attorney who, she argued, did not represent her wishes or interests. However, while the media has given wide coverage to Spears’s side of the dispute, we have heard almost nothing from the professionals handling her affairs, who are constrained from publicly disclosing confidential information.

It’s easy to see why conservatorship, which takes away a person’s right to make decisions about significant aspects of his own life, is considered among the most restrictive legal remedies in the American judicial system. For this reason, courts are legally required to seek alternatives that will safeguard the ward’s finances and wellbeing but with the fewest restrictions, in an effort to protect that person’s rights.

Protections Without Total Loss of Control

In the case of an elderly person who may no longer be able to handle some or all of her own affairs, there are various approaches that provide protection without stripping that person of control over all decisions, as in Spears’s case.

Many people in need of help can make responsible decisions in some areas of their lives but not others (such as making major financial decisions). Families might consider setting up what’s called a “limited guardianship.” Most states allow judges to appoint guardians with limited powers that are specifically tailored to the alleged incapacitated person's needs. For example, a court can appoint a guardian to oversee a person's housing and health care, but not to manage the person's bathing, eating, and socialization. Conservators can be appointed to handle the financial affairs of someone who is not good with money, without having any power to manage health care decision making—the options are almost infinite.

Alternatives to Guardianship

Sometimes, guardianship isn't the answer at all. If a person can execute estate planning documents, she can also sign a durable power of attorney and a health care proxy, which allows someone to assist her with decisions without court involvement. "Supported decision making" is a growing alternative to guardianship in which trusted advisors like family, friends or professionals assist in making decisions, although the individual retains the ultimate right to make their own decisions.

Trying an alternative to guardianship can be important for several reasons. First, it prevents a court from ruling that someone is "incapacitated," which carries with it a stigma and can be hard to undo, as Britney Spears is finding. Second, it puts the person in the driver's seat. Third, it is much less expensive and time-consuming.

Another option is a revocable or "living" trust that can be set up to hold an older person's assets, with a relative, friend or financial institution serving as trustee. Alternatively, the older person can be a co-trustee of the trust with another individual who will take over the duties of trustee should the older person become incapacitated.

Experts say that Britney Spears faces a long, difficult path if she seeks to terminate her conservatorship. She would need to file a formal petition, which would require presenting evidence in hearings and depositions. She could face objections at every stage from attorneys representing her father and others involved in her care. (Spears has indicated her unwillingness to submit to a mental evaluation or test in her effort to end the conservatorship.)

If you have questions about what type of guardianship may be right for your family member, or if you are currently under guardianship and are looking to gain control of your affairs, talk to your elder law attorney today.

For an article on what may lie ahead in the Britney Spears case, click here.

For an article by University of Virginia Family Law Professor Naomi Cahn on how guardianships can lead to abuse, click here.

Biden Administration May Spell Changes to Estate Tax and Stepped-Up Basis Rule

A new administration usually means that tax code changes are coming. While it remains unclear exactly what tax changes President Biden’s administration will usher in, two possibilities are that it will propose lowering the estate tax exemption and eliminating the stepped-up basis on death. The first would affect only multi-millionaires, but the second could have an impact on more modest estates and their heirs. 

In 2017, Republicans in Congress and President Trump doubled the federal estate tax exemption and indexed it for inflation. For the 2021 tax year, the exemption is $11.7 million for individuals and $23.4 million for couples. As long as your estate is valued at under the exemption amount, it will not pay any federal estate taxes, and the vast majority of estates do not owe any tax. President Biden has expressed an interest in lowering the estate tax exemption. It could be more than halved to $5 million or even reduced to the previous exemption of $3.5 million for individuals. 

Another possible tax change is to how property is valued when it is passed on at death. "Cost basis" is the monetary value of an item for tax purposes. When determining whether a capital gains tax is owed on property, the basis is used to determine whether an asset has increased or decreased in value. For example, if you purchase a stock for $10,000, that is the cost basis. If you later sell it for $50,000, you will have to pay taxes on the $40,000 increase in value. 

Under current law, when a property owner dies, the cost basis of the property is "stepped up." This means the current value of the property becomes the basis. For example, suppose you inherit a house that was purchased years ago for $50,000 and it is now worth $250,000. You will receive a step up from the original cost basis from $50,000 to $250,000. If you sell the property right away, you will not owe any capital gains taxes.

According to an article in the New York Times, the current administration may propose to eliminate the basis step-up rule. In the past it was difficult to determine the original cost basis of some property, but in the digital age that information is more easily gathered. The change could result in tax increases for some people inheriting property that has risen significantly in value. 

Another question is whether either of these changes will be made retroactively. It is unlikely, but possible, that if Congress changes these rules later in the year, they could be made retroactive to the first of the year. 

If you are concerned about these rules changing, a trust may be a good way to protect your estate. Property in a trust passes outside of probate, and there are specific types of trusts that are designed to protect assets against estate taxes and capital gains. Talk to your attorney to determine if a trust is right for you. 

Tax experts agree that while changes to the tax code are likely, they probably won’t happen right away. The coronavirus pandemic and the recession it has triggered mean that Congress has other priorities at the moment. 

The Attorney's Role in Medicaid Planning

Do you need an attorney for even "simple" Medicaid planning? This depends on your situation, but in most cases, the prudent answer would be "yes."

The social worker at your mother's nursing home assigned to assist in preparing a Medicaid application for your mother knows a lot about the program, but maybe not the particular rule that applies in your case or the newest changes in the law. In addition, by the time you're applying for Medicaid, you may have missed out on significant planning opportunities.

The best bet is to consult with a qualified professional who can advise you on the entire situation. At the very least, the price of the consultation should purchase some peace of mind. And what you learn can mean significant financial savings or better care for you or your loved one. This may involve the use of trusts, transfers of assets, purchase of annuities or increased income and resource allowances for the healthy spouse.

If you are going to consult with a qualified professional, the sooner the better. If you wait, it may be too late to take some steps available to preserve your assets.

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How Will the Coronavirus Pandemic Affect Social Security?

The coronavirus pandemic is having a profound effect on the current U.S. economy, and it may have a detrimental effect on Social Security’s long-term financial situation. High unemployment rates mean Social Security shortfalls could begin earlier than projected. 

Social Security retirement benefits are financed primarily through dedicated payroll taxes paid by workers and their employers, with employees and employers splitting the tax equally. This money is put into a trust fund that is used to pay retiree benefits. The most recent report from the trustees of the Social Security trust fund is that the fund’s balance will reach zero in 2035. This is because more people are retiring than are working, so the program is paying out more in benefits than it is taking in. Additionally, seniors are living longer, so they receive benefits for a longer period of time. Once the fund runs out of money, it does not mean that benefits stop altogether. Instead, retirees’ benefits would be cut, unless Congress acts in the interim. According to the trustees’ projections, the fund’s income would be sufficient to pay retirees 77 percent of their total benefit. 

With unemployment at record levels due to the pandemic, fewer employers and employees are paying payroll taxes into the trust fund. In addition, more workers may claim benefits early because they lost their jobs. President Trump issued an executive order deferring payroll taxes until the end of the year as a form of economic relief, which could negatively affect Social Security and Medicare funds.  

Some experts believe that the pandemic could move up the depletion of the trust fund by two years, to 2033, if the COVID-19 economic collapse causes payroll taxes to drop by 20 percent for two years. Other experts argue that it could have a greater effect and deplete the fund by 2029. However, as the Social Security Administration Chief Actuary morbidly noted to Congress, this pandemic different from most recessions: the increased applications for benefits will be partially offset by increased deaths among seniors who were receiving benefits. 

It remains to be seen exactly how much the pandemic affects the Social Security trust fund, but the experts agree that as soon as the pandemic ends, Congress should take steps to shore up the fund.

How to Use a Trust in Medicaid Planning

With careful Medicaid planning, you may be able to preserve some of your estate for your children or other heirs while meeting Medicaid's low asset limit.

The problem with transferring assets is that you have given them away. You no longer control them, and even a trusted child or other relative may lose them. A safer approach is to put them in an irrevocable trust. A trust is a legal entity under which one person -- the "trustee" -- holds legal title to property for the benefit of others -- the "beneficiaries." The trustee must follow the rules provided in the trust instrument. Whether trust assets are counted against Medicaid's resource limits depends on the terms of the trust and who created it.

A "revocable" trust is one that may be changed or rescinded by the person who created it. Medicaid considers the principal of such trusts (that is, the funds that make up the trust) to be assets that are countable in determining Medicaid eligibility. Thus, revocable trusts are of no use in Medicaid planning.

Income-only trusts

An "irrevocable" trust is one that cannot be changed after it has been created. In most cases, this type of trust is drafted so that the income is payable to you (the person establishing the trust, called the "grantor") for life, and the principal cannot be applied to benefit your or your spouse. At your death the principal is paid to your heirs. This way, the funds in the trust are protected and you can use the income for your living expenses. For Medicaid purposes, the principal in such trusts is not counted as a resource, provided the trustee cannot pay it to you or your spouse for either of your benefits. However, if you do move to a nursing home, the trust income will have to go to the nursing home.

You should be aware of the drawbacks to such an arrangement. It is very rigid, so you cannot gain access to the trust funds even if you need them for some other purpose. For this reason, you should always leave an ample cushion of ready funds outside the trust.

You may also choose to place property in a trust from which even payments of income to you or your spouse cannot be made. Instead, the trust may be set up for the benefit of your children, or others. These beneficiaries may, at their discretion, return the favor by using the property for your benefit if necessary. However, there is no legal requirement that they do so.

One advantage of these trusts is that if they contain property that has increased in value, such as real estate or stock, you (the grantor) can retain a "special testamentary power of appointment" so that the beneficiaries receive the property with a step-up in basis at your death. This will also prevent the need to file a gift tax return upon the funding of the trust.

Remember, funding an irrevocable trust within the five years prior to applying for Medicaid (the "look-back period") may result in a period of ineligibility. The actual period of ineligibility depends on the amount transferred to the trust. 

Testamentary trusts

Testamentary trusts are trusts created under a will. The Medicaid rules provide a special "safe harbor" for testamentary trusts created by a deceased spouse for the benefit of a surviving spouse. The assets of these trusts are treated as available to the Medicaid applicant only to the extent that the trustee has an obligation to pay for the applicant's support. If payments are solely at the trustee's discretion, they are considered unavailable.

Therefore, these testamentary trusts can provide an important mechanism for community spouses to leave funds for their surviving institutionalized husband or wife that can be used to pay for services that are not covered by Medicaid. These may include extra therapy, special equipment, evaluation by medical specialists or others, legal fees, visits by family members, or transfers to another nursing home if that became necessary. But remember that if you create a trust for yourself or your spouse during life (i.e., not a testamentary trust), the trust funds are considered available if the trustee has the ability to use them for you or your spouse.

Supplemental needs trusts

The Medicaid rules also have certain exceptions for transfers for the sole benefit of disabled people under age 65. Even after moving to a nursing home, if you have a child, other relative, or even a friend who is under age 65 and disabled, you can transfer assets into a trust for his or her benefit without incurring any period of ineligibility. If these trusts are properly structured, the funds in them will not be considered to belong to the beneficiary in determining his or her own Medicaid eligibility. The only drawback to supplemental needs trusts (also called "special needs trusts") is that after the disabled individual dies, the state must be reimbursed for any Medicaid funds spent on behalf of the disabled person.

To find out whether a trust is the right Medicaid planning strategy for you, talk to your elder law attorney.