Incapacity planning encompasses pre-planning to get your wishes in writing and authorizing trusted helpers to act on your behalf when you cannot.  This keeps you in control and avoids court interference.  The guardianship (or conservatorship) court process was established to help people who don’t do their own incapacity planning and have no one authorized to help them.

This is a good thing, but if you have the choice, and you do, it should be avoided.  Court interference is a total loss of control; plus, it’s expensive, time-consuming, and can be heartbreaking.  Basically, it’s a court case wherein family members, doctors, social workers, and the like have to testify that you are incompetent in a public courtroom.

For financial incapacity planning, all adults need a financial power of attorney and should consider a revocable living trust (it’s a good fit for most people.)

For medical incapacity planning, all adults need a health care power of attorney and HIPAA release and should consider a living will and organ donation authorization.

• Financial power of attorney:  a legal document in which an individual authorizes an agent to act on hisor her  behalf in financial and personal business matters.  Most powers of attorney are effective immediately, but aren’t used until incapacity occurs.  Authorization under a power of attorney ends at death.

• Revocable living trust:  a legal document in which an individual authorizes a trustee to act on his or her behalf  if he becomes incapacitated. The disability trustee has authority to act so long as the trust maker is incapacitated; if capacity is regained or the trust maker dies, then the disability trustee’s authority ends.

• Health care power of attorney:  a legal document that authorizes agents to make medical decisions for the benefit of another if that person cannot provide informed consent.

• HIPAA release:  a legal document that is required for medical privacy laws; it allows medical personnel and health care agents to communicate to named persons (family members, etc.).

• Living will:  a legal document containing an advance medical directive stating that if the principal is in a persistent vegetative state or irreversible coma, no medical heroics, such as life support, will be provided.

• Organ donation authorization:  a legal document containing an advance medical directive, stating that the principal wishes to donate his organs and tissues upon death.

If you don’t have incapacity planning in place, consult with a qualified estate planning attorney.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

Power of attorney grants the power to a second party, often your child, to make legal and financial decisions for you. It is usually a back up a plan, in case an unexpected accident happens and you are unable to keep your affairs in order.  But what if you are uncomfortable handing over all rights to a child now, under a power of attorney, while you are still capable of managing your own affairs?

Implementing a springing power of attorney could be your solution.

A springing power is a power of attorney that only becomes effective if you (the grantor or person signing the power) become disabled. This approach addresses the exact concern raised. You do not provide powers to your kid as agent until you really need the help, i.e. when you cannot handle matters on your own.

While this sounds seductively good and simple, as the saying goes, the devil is in the details. If you cannot trust your kid while you are alive, well and astute to keep an eye on the kid, why and how can you trust the kid to do right when you’re disabled? Furthermore, the entire concept of a springing power is often questionable. How do you define “disabled” such that the power of attorney springs into effect? There is no simple definition.

What if you have a temporary illness? If you recover, how do you get the financial reins back from junior? All these issues can be dealt with, but they add complexity. Also, do not forget about HIPAA complications. This law imposes strict limitations on the disclosure of medical information. To prove disability, you need to address these
requirements.  Once you get through all that, your kid will have to convince the bank, or other person to accept the power. This is not always so simple.

So, while a springing power can address a common parental worry, it also creates a host of issues. A power effective immediately might mitigate some of the concerns. A funded revocable living trust can provide an even more comprehensive alternative. The bottom line is, even a power of attorney, which too many people dismiss as “simple” and “standard” process, is fraught with issues that you should only ignore at
your own peril.

For answers to your estate planning questions, contact the Deborah Sexton Law Office at (479) 443-0062 or www.arkansas-estateplanning.com.  Deb offers free half-hour consultations.

This information is brought to you by Martin M. Shenkman, CPA, PFS, MBA, JD, AEP® through the NAEPC Foundation. 

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

There are many different varieties of wills and trusts to fit the needs of each individual.  Only a qualified attorney should draft these documents.  To give
you an idea of the options available to you, please see the below common definitions of several types of wills and trusts.  If you have further questions, please contact the Deborah Sexton Law Office at (479) 443-0062 or www.arkansas-estateplanning.com.
Deb offers free half-hour consultations.

Basic will:  A basic or simple will generally gives everything outright to a surviving spouse, children or other heirs.

Will with contingent testamentary trust:  Frequently, married couples with minor children will pass everything to their spouse, if living, and if not, to a trust for their minor children until they become more mature.

Pour-over will:  The so-called “pour-over” will is generally used in conjunction with a living trust.  It picks up any assets that were not transferred to the trust during the
person’s lifetime and pours them into the trust upon death.  The assets may be subject to probate administration, however.

Tax-saving will:  A will may be used to create a testamentary credit shelter trust.  This trust provides lifetime benefits to the surviving spouse, without having those trust assets included in the survivor’s estate at his or her subsequent death.

Living trust without tax planning:  Generally, the surviving spouse has full
control of the principal and income of this type of trust.  Its main purpose is to avoid probate.  If required, the trust can also be used to manage the assets for beneficiaries who are not yet ready to inherit the assets outright because they lack experience in financial and investment matters.

Bypass trust:  This type of trust avoids probate and allows the first spouse to die of a married couple to set aside up to $5,000,000* in assets for specific heirs while  providing income and flexibility to the surviving spouse.  The appreciation on assets in the trust can avoid estate tax.

QTIP trust:  A type of trust known as a QTIP trust allows the first spouse to die to specify who will receive his or her assets after the surviving spouse dies.  Use of a QTIP also permits the deferral of death taxes on the assets until the death of the surviving spouse.

QTIP means “qualified terminable interest property.”  The income earned on assets in a QTIP trust must be given to the surviving spouse for his or her lifetime.  After the death of the surviving spouse, however, the assets then pass to beneficiaries chosen by the first spouse to die, frequently children of a prior marriage.

Qualified domestic trust:  Transfers at death to a noncitizen spouse will not qualify for the marital deduction unless the assets pass to a qualified domestic trust (QDOT).  The QDOT rules require a U.S. Trustee  (unless waived by the IRS) and other measures that help ensure collection of a death tax at the surviving noncitizen spouse’s later demise.

For more information or to set up a free half-hour consultation, contact the Deborah Sexton Law Office at (479) 443-0062 or go to www.arkansas-estateplanning.com.

Note:  Additional trusts may be used for current income tax savings or to remove life insurance from the taxable estate, but the above-described documents are generally at the center of a person’s estate plan.

*The applicable exclusion amount is the dollar value of assets protected from federal estate tax by an individual’s applicable credit amount.  For 2011, the applicable  exclusion amount is $5,000.000.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

Last May, the U.S. Department of Health and Human Services announced new steps to reduce premiums and make it easier for Americans to enroll in the Pre-Existing
Condition Insurance Plan (PCIP) to ensure more Americans with pre-existing
conditions have access to affordable health insurance.

For more information, including eligibility, plan benefits and rates, as well and
information on how to apply, click here.

For a chart showing changes to PCIP premiums in the States with
Federally-administered PCIP programs, click here.

Information from the National Academy of Elder Law Attorneys.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

Creating an Alzheimer’s friendly home is similar to childproofing a home; your best bet to is keep your solutions simple, re-evaluate the situation as needed and make sure the changes you’ve made to the home really do work for you and can provide optimal Alzheimer’s care solutions.  Here are some tips:

• Remove clutter.
• Prepare a space that can be used as a locked storage space such as a closet.
• Limit options.  Don’t place multiple items/options in drawers or cabinets, instead put in only a few items.
• Don’t move furnishings around unless absolutely necessary.
• Make commonly used items easily accessible.
• Re-evaluate mirrors.  In the early stages of Alzheimer’s, mirrors can encourage good grooming habits.  However, in the later stages of Alzheimer’s mirrors may be disconcerting because individuals might not recognize themselves.
• Remove busy upholstery and wallpaper patterns because they can be c0nfusing  for people with dementia.
• Make lighting clear and warm.  Avoid lamps that cast shadows which can be mistaken for frightening people or animals.
• Create visual cues.  Color contrasts often help to make it clearer what an object is, as where the object begins and ends.
• Keep important documents and bills in a safe place where they can be easily found.
• Decide which areas are off limits.  If wandering is an issue, get locks on doors.  Additionally, you can make the garage a locked storage space so that dangerous items can be kept there.

These tips are from the Alzheimer’s Arkansas Programs and Services Newsletter.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

Disability planning is an essential part of estate planning.  Each and every person over the age of 18 needs disability planning and below are three reasons why. 

1.  To avoid loss control

Should you become disabled without proper disability planning in place, the court will take over your assets and make all financial decisions on your behalf.  Your assets will be frozen so your spouse does not have access to them even if her name is on the accounts. 

The court will name a guardian to manage your assets.  This may or may not be your spouse or another loved one.  The court often names an attorney as guardian and will continue to oversee your finances so long as you remain disabled.  This is a total loss of control.

2.  To avoid court guardianship

The loss of control during and following the court process of guardianship is described immediately above.  In addition, guardianship proceedings are time consuming, expensive, and stressful for you and your family.

Like any court proceeding, the guardianship can take time to get on the docket.  It is not a quick process.  In the meantime, no one has authority to act on your behalf.

Guardianships are expensive; medical and social worker witnesses, lawyers, and the court need to be paid.  Note that “lawyers” is plural.  Your loved ones will likely need to hire an attorney to represent you and an attorney to represent their own interests.

Highly stressful may be an understatement.  Your family members will likely have to testify and listen to the testimony of witnesses who will have to illustrate why you are incompetent to manage your assets and provide for your own care.  You will hear all of this too. 

3. To get what you want

If you want to be the one that defines your disability, chooses who will act on your behalf, and selects what kind of care you received during disability, you need disability planning.

If you don’t have up to date disability planning in place, consult with a qualified estate planning attorney.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

The living will and medical power of attorney have similarities, but are not the same.  Both legal documents are part of an estate plan.  Most people find it comforting to have both the living will and medical power of attorney in place.

Part of estate planning is planning for a time when you cannot make decisions for yourself; this includes health care decisions.  The living will documents you making a specific health care decision ahead of time.  The medical power of attorney documents your selection of an agent to make health care decisions on your behalf.

The Living Will

A living will is a legal document that authorizes medical measures that may hasten your death but keep you comfortable.  It also authorizes the withholding of medical measures that would serve to artificially extend your life.  It may be helpful to think of a living will as preventing heroic measures such as being hooked up to machines, while brain dead, for 17 years (i.e. Terry Schiavo.)

A living will is only effective if you are at the very end of life.  It is not effective if you are in good health and have a health issue or suffer injury.  Most living wills dictate that heroics may not be used if you are in an irreversible coma, vegetative state, or otherwise terminal and at the very end of life. 

A living will represents your medical decision made, during a time when you were competent to make the decision, which is only effective at a later time.  Your agent under a medical power of attorney cannot override your living will.

The Medical Power of Attorney

The medical power of attorney is similar to a financial durable power of attorney (sometimes called a general durable power of attorney), except is effective for health care decisions only, not financial decisions other than that the authorization of medical care that costs money. 

In a medical power of attorney, you name an agent to make health care decisions when you can no longer make those decisions.  While it is common to name your spouse or children, it is wise to select an agent who is comfortable with medical terminology and dealing with doctors. 

If you have questions regarding why you need a living will and medical power of attorney, consult with a qualified estate planning attorney.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

Social Security Disability also known as SSD or SSDI and SSI which is the acronym for Supplemental Security income programs administered by the Social Security Administration. These programs have some things in common, but they are more different than they are alike.

Medical Definition of Disability

The Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) use the same criteria for determining whether a person is medically eligible for benefits. In order to be eligible for benefits medically a person’s condition, illness, or injury must significantly limit your ability to do basic work activities—such as walking, sitting, and remembering—for at least one year. The listing of impairments for adults and children is also the same for both programs.

Differences between the Programs

Other Similarities between the Programs

The rights to appeal and the appeals process is the same for both programs. You have the right to appeal any decision made in your case. Your case is also subject to a disability review if there is a potential that your condition will improve regardless of which program pays your benefits.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

As the baby boomer generation begins to retire the concern about the need for long-term care increases. Long-term care is expensive. In Arkansas, the average costs are as follows:*

• Avg. Daily Nursing Home Rate : Private $150
• Avg. Daily Nursing Home Rate : Semi-Private $128
• Avg. Monthly Cost in Assisted Living Facility: $2,194
• Home Health Aide Average Hourly Rate: $15
• Homemaker Services Average Hourly Rate: $15
• Adult Day Services Daily Rate: $77

The rates for care in Little Rock are higher than the state averages. The costs for long-term care in Arkansas are lower than the national average.

Medicare only pays the full cost of nursing home care for the first 20 days; after that, Medicare will pay for a portion of the cost up to the 100^th day of care. Payment for nursing home care by Medicare after the 100^th day stops. In addition, Medicare will not pay for care in an assisted living facility, continuing care retirement community or adult daycare. Medicaid funding for these services depends on the state.

This means that most of the cost for long-term care will be out of pocket, unless you purchased long-term care insurance.

Long-term care insurance is probably the best option to cover costs of long-term care. However, it is impossible to buy when you need it. Many employers are offering long-term care insurance as part of a benefit package. If you have young adults just entering the work force advise them to take advantage of this insurance while they can get it for less expense. You could also consider asking your employer to provide it as part of your benefit package in lieu of a raise; it could save you both money.

*Source: National Clearinghouse for Long-Term Care Information

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.

A guardian is a person who is appointed by a court to control and take care of interests of a person who cannot handle their own affairs. There are two types of guardians

• Guardian of the person – the guardian controls and takes care of the ward’s personal interests. They can make decisions about where there person lives, medical care, and schooling
• Guardian of the property – has control of the ward’s finances.

It is possible for one person to have both roles, as guardian of the person and the property but it is not required.

Courts appoint guardians of incapacitated adults and minor children. Parents who have small children can appoint someone the guardian of their children who would act in the child’s best interest if they die prematurely. Appointing a guardian of young children is an essential component of any good estate planning.

Courts appoint guardians of incapacitated adults when a petition is filed by a person of interest (usually a family member) that the ward is in danger because they are physically incapacitated or mentally incapacitated and in danger of being taken advantage of by unscrupulous persons. This situation often happens in the case of elderly persons who have developed Alzheimer’s or some other debilitating disease.

A person who is appointed guardian of a ward is under the continued supervision of the court. The guardian of the person must make at least annual reports of how the ward’s money is being managed and maintained. The guardian must seek permission from the court to make major expenditures on behalf of the ward. The guardian is also compensated for their services. Any expenses they incur on behalf of the ward should be deducted from the assets being held for the ward.

Deborah Sexton Law Office, PA is a member of the American Academy of Estate Planning Attorneys.