People diagnosed with Alzheimer’s Disease and their families need to address estate planning issues early while the person has sufficient mental capacity to understand the issues and make informed decisions. In this, the second of a 2 part article, I discuss 3 of the 6 vital estate planning steps Alzheimer’s patients and their families need to take. Click here to read the first 3 tips for estate planning for people diagnosed with Alzheimer’s.
Estate Planning Tip #4: Have a durable power of attorney and revocable trust prepared to manage assets
Without proper documents in place, an impaired person’s assets will have to be managed by a “conservator” appointed by the probate court. Conservatorships are cumbersome and intrusive. They should be avoided to the greatest extent possible. Because the appointment of a conservator takes away a person’s rights to deal with his or her own assets, there are procedural safeguards to assure that only necessary restrictions are imposed.
Giving a trusted person or a bank a “durable” power of attorney (POA) is the simplest way to avoid the involvement of the probate court. Power of Attorney documents provide that the power remains in effect even if the person giving it (the “principal”) is disabled or incapacitated. They can be quite helpful, but they have one major drawback. Banks and brokers sometimes refuse to accept them. Financial institutions sometimes claim that the power is “too old.” After it’s too late to change the document, because the principal no longer has capacity, a POA may be rejected it because it wasn’t in the statutory format and there is no way to force them to accept the power of attorney.
A properly drafted and funded revocable trust is a much better vehicle to deal with disability than a power of attorney. Our law firm has had very good experience having these trusts accepted by financial institutions. Unlike POA’s, trusts have a well-developed body of law behind them. This gives banks, brokers, and other “third parties” dealing with the trustee of the trust a higher level of comfort. A properly drafted trust agreement can provide protection from liability for people and institutions who act in accordance with the trustee’s instructions.
Estate Planning Tip #5: Transfer assets to the “well” spouse
Married couples often own everything jointly and name each other as beneficiary of life insurance and retirement plans. In many cases, especially where estate taxes are not an issue, this is fine. However consider the following scenario:
John and Mary have a house, bank accounts and other assets worth $500,000. John is 60 years old and has just been diagnosed with dementia. If he survives Mary, he would not be eligible to receive Medicaid because he owns all the assets. He can’t disclaim them or give them away to qualify for assistance.
Suppose that all of the assets were put in Mary’s name when John is diagnosed with Alzheimer’s and Mary’s will provided for a “Medicaid qualifying” trust for John. A Medicaid qualifying trust would enable the trustee to make distributions for John’s benefit without affecting his qualification for Medicaid.
Estate Planning Tip #6: Consider the possibility of a will contest
Greedy relatives. Weak economy. Too many lawyers. An aging population. “Do it yourself” estate planning documents. “Entitlement generation” children helping themselves to their parents’ assets. These are some of the factors in the perfect storm causing a surge in will contest litigation.
When planning the estate of someone diagnosed with Alzheimer’s, it’s important to candidly discuss who might contest the person’s will and the reasons why so you can prevent unnecessary and costly litigation later.
Here are some of the predictors of a possible will contest:
- A spouse receives less than he/she expected or their share of the estate is left in trust without their knowledge
- Out of wedlock children not named or provided for in the will
- Significant changes from prior wills
- Disproportionate distribution to one child
- Bequest to professional advisor or clergy
If there is even a remote chance of a contest, it is vitally important to ascertain, and memorialize, all of the relevant facts now, before the person’s cognitive impairment makes it impossible. A way to avoid problems in the future is to preserve evidence that the person knew who his or her family members were and knew the nature and extent of his or her assets. If possible, arrange to re-execute the will with witnesses who knew the person well. They will need to testify about the underlying facts that led them to the conclusion that the person had the capacity to make a will.
The witnesses may have to testify in court about the will maker’s intentions and that he or she understood what his or her assets were and the identity of his or her family members. If the lawyer explains to the person that, the more that he or she is willing to state to the witnesses the reason for the will provisions, the greater the chance of avoiding or winning a contest.
You are not alone. Get help and support.
A diagnosis of Alzheimer’s is overwhelming. Help and support are available to Alzheimer’s patients and their families from the Alzheimer’s Association. Their highly trained and professional staff offers support groups and educational workshops. They can provide you with information on:
- Understanding memory loss, dementia and Alzheimer's
- Medications and other treatment options
- General information about aging and brain health
- Skills to provide quality care and to find the best care from professionals
- Legal, financial and living-arrangement decisions
You can obtain further information on their website: www.alz.org or by calling them at 1-800-272-3900 (24 hour helpline). The Connecticut chapter is conveniently located in Southington. Their telephone number is 860-828-2828.
And if you have any questions about anything in this article or want to discuss estate planning, please give us a call. Our TrustLawyer team is here to help you. Our phone number is 860-257-4330.