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The Revocable Living Trust:  A Better Way To Manage An Aging Senior’s Assets

The Revocable Living Trust: A Better Way To Manage An Aging Senior’s Assets

As they age, some seniors become less and less able to manage their own assets.  Attorneys frequently use the phrase “incapacity planning” to indicate estate planning done for a client diagnosed with dementia, or with other mental or physical disabilities, who will require another responsible adult to eventually manage his financial (and legal) affairs.

THE FINANCIAL POWER OF ATTORNEY

The Financial Power of Attorney (FPOA), also called a Durable Power of Attorney (DPOA), allows a fiduciary, called an “agent”, to manage an impaired senior’s financial and legal affairs.  The term “fiduciary” refers to a person who must act in the best interests of the principal when managing his assets.  While the FPOA remains the most commonly known tool for managing an incapacitated senior’s assets, management through a Revocable Living Trust (RLT) can offer significant advantages.

HOW A REVOCABLE LIVING TRUST WORKS FOR INCAPACITY PLANNING

After a RLT is set up, the client’s assets are moved into the trust, and those assets are then managed by a fiduciary called a “trustee”.  During the senior’s lifetime, and while the senior is mentally able, he serves as trustee for his own assets.

A spouse, and/or a trusted adult from a younger generation (such as the senior’s child), may also be added to the trust document as current co-trustees (along with the senior.)  Then, at any time that the senior needs help managing his or her assets, a responsible co-trustee is available, and can step in immediately to help out, with no delay and with no additional legal requirements.

MANAGING FINANCIAL ASSETS THROUGH A REVOCABLE LIVING TRUST:  ADVANTAGES

Using a RLT for incapacity planning conveys the following advantages:

  • Higher Level of Authority. In both U.S. and European law, a trustee is generally provided a higher level of authority to manage assets than a FPOA agent, and a trustee usually receives a higher level of respect and deference;
  • Clear Directions for Managing Assets. Trust documents normally give the trustee detailed directions for managing the senior’s assets.  In contrast, FPOA documents typically do not provide any directions to agents regarding how the senior’s assets are to be managed or used.
  • Banks Prefer Dealing With Trustees. Banks, brokerage firms, and other financial management firms greatly prefer dealing with trustees over agents, for these reasons, and with these results:
    • FPOA Documents Are Frequently Associated With Fraud. FPOA documents are inexpensive, easy to obtain, and frequently forged.  Seniors often sign these documents without understanding the repercussions, or are inappropriately pressured to sign these documents by unethical agents.  In contrast, RLTs are more commonly drafted by attorneys, and signed in the lawyer’s office, thereby lowering the risk of fraud.
    • Legal Department Review May Take a Significant Amount of Time.  Because of the fraud risk associated with FPOAs, a financial institution’s legal department may take a significant time, sometimes months, to review a FPOA.  When reviewing the application for a new RLT trustee, if any documents are required to be reviewed at all, a fairly straightforward review of the Certification of Trust document (a summary of trust terms), along with any required personal identification information,  can be all that the financial institution needs.
    • The Bank’s Own Form May Be Required. Because of the ongoing fraud risks, some financial institutions may require the use of their own FPOA forms, and not accept outside FPOA forms.  If the senior has already become incapacitated, he or she will not be able to sign a new bank FPOA form.  In contrast, such rules do not apply to RLTs.
    • FPOA Forms May Become Outdated. Because of the ongoing fraud problem, some financial institutions may not accept FPOA forms which are greater than a certain number of years (5 years for example) old.   If the senior has already become incapacitated, he or she will not be able to sign a new FPOA form.  In contrast, however, even very old trust documents are commonly relied on.

Even where a RLT is successfully used for incapacity planning, a valid FPOA document signed together with the RLT remains useful in certain areas.  The trustee provisions of the RLT only apply to the assets which are held by the trust (the trust estate.)  Any of the senior’s assets not held within the trust (the probate estate) may still need to be managed through the FPOA.  In addition, the FPOA may convey important authority to the agent to manage the senior’s legal affairs, in ways that may not be addressed by the RLT.

Because these subjects may be complicated, incapacity planning should be discussed directly with a licensed elder law, or estate planning, attorney.

How A Caregiver Child Or A Sibling Can Save A Senior’s Home From Medicaid Estate Recovery

How A Caregiver Child Or A Sibling Can Save A Senior’s Home From Medicaid Estate Recovery

Seniors who must use Medicaid to finance their long-term care, risk losing their home to Medicaid estate recovery following their death, or following the death of their spouse.  In Medicaid estate recovery, Medicaid bills the Medicaid recipient’s estate for every dollar spent on the Medicaid recipient during life.  Because such bills can reach several hundred thousand dollars in size, the senior’s home may need to be sold in probate to pay all or part of the Medicaid bill.

CAREGIVER CHILD EXCEPTION

A caregiver child who lives with the senior for two years prior to the Medicaid recipient’s institutionalization may keep the home away from Medicaid estate recovery, at least while that child remains in the home.  The caregiver child must have provided care that may have delayed the recipient’s admission to a nursing home or other medical institution.  Such a child who meets these conditions may continue to live in the home as long as needed free of Medicaid estate recovery.  If the child moves out of the home, however, the state can then legally initiate estate recovery.

RESIDENT SIBLING EXCEPTION

A sibling who continues to reside in the senior’s home following the senior’s institutionalization may also save the home from Medicaid estate recovery.  Such a sibling must have an equity interest in the home, and must have lived there for at least one year before the deceased Medicaid recipient was institutionalized.   As with the caregiver child above, if the qualifying sibling moves out of the home, the state can then legally initiate estate recovery.

SPOUSE, CHILD UNDER AGE 21, AND BLIND OR PERMANENTLY DISABLED CHILD EXCEPTIONS

The home is protected, and Medicaid estate recovery is prohibited, if the deceased Medicaid recipient is survived by:  1) a spouse; 2) a child under age 21; or 3) a blind or permanently disabled child of any age.  All three categories of survivors are not required to live in the home, and may do what they wish with the home following the Medicaid recipient’s death.

ELDER LAW METHODS

An elder lawyer may incorporate other methods to prevent Medicaid estate recovery of the home, including utilizing a specialized deed such as a joint with right of survivorship (JTWROS) deed or Ladybird deed.

Source:

Medicaid Treatment of the Home:  Determining Eligibility and Repayment for Long-Term Care, Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services (April 1, 2005), https://aspe.hhs.gov/basic-report/medicaid-treatment-home-determining-eligibility-and-repayment-long-term-care

Combination of Strength and Aerobic Training Found Best Medicine for Obese Elderly

Combination of Strength and Aerobic Training Found Best Medicine for Obese Elderly

For obese people over age 64, the combination of aerobic exercise and weight training is better for improving physical functioning than either form of exercise alone, a new study concludes.

Each type of exercise, and a combination of the two, produced 9 percent reductions in body weight over six months. But the combination provided the best mix of protection against muscle and bone loss with improved aerobic capacity. Aerobic exercise and weight training (also known as resistance training) “have additive effects in improving your physical function,” chief author Dr. Dennis Villareal of the Baylor College of Medicine and the DeBakey VA Medical Center in Houston told Reuters Health by phone.

The findings in the New England Journal of Medicine have broad significance because one third of older adults in the United States are obese, and frequently experience all the health risks that obesity creates.

Lifestyle and Southern diet factors place a large number of North Carolina seniors at risk for obesity, and being sedentary places seniors at an even greater additional risk.  Those risks, however, are mostly preventable.  An improved diet, and regular exercise, can help seniors remain independent, active, healthier, happier, and in control of their business and legal affairs much longer, adding to quality and length of life.

Sources:

National Academy of Elder Law Attorneys, (May 24, 2017).

Dennis Villareal, at al, Aerobic or Resistance Exercise, or Both, in Dieting Obese Older Adults, New England Journal of Medicine (May 18, 2017), http://www.nejm.org/doi/full/10.1056/NEJMoa1616338

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