How Do I Prepare my Parents for Alzheimer’s?

Can your mom just sell her house, despite her diagnosis of Alzheimer’s?

The (Bryan TX) Eagle reports in the recent article “MENTAL CLARITY: Shining a light on the capacity to sign Texas documents” that the concept of “mental capacity” is complicated. There’s considerable confusion about incapacity. The article explains that different legal documents have a different degree of required capacity. The bar for signing a Power of Attorney, a Warranty Deed, a Contract, a Divorce Decree, or a Settlement Agreement is a little lower than for signing a Will. The individual signing legal documents must be capable of understanding and appreciating what he or she is signing, as well as the effect of the document.

The answer the question of whether the mom can sign the deed to her house over to the buyer.  is likely “yes.” She must understand that she’s selling her house, and that, once the document is signed, the house will belong to someone else. A terminal diagnosis or a neurodegenerative disease doesn’t automatically mean that an individual can’t sign legal documents. A case-by-case assessment is required to see if the document will be valid.

The fact that a person is unable to write his or her name doesn’t mean they lack capacity. If a senior can’t sign her name (possibly due to tremors or neurodegeneration), she can sign with an “X”. She could place her hand on top of someone else’s and allow the other person to sign her name. If this is completed before witnesses and the notary, that would be legal.

A hard part of Alzheimer’s is that a person’s mental clarity can come and go. Capacity can be fluid in the progress of a neurodegenerative or other terminal disease. Because of this, the best time to sign critical documents is sooner rather than later. No one can say the “window of capacity” will remain open for a certain amount of time.

Some signs should prompt you to move more quickly. These include things like the following:

  • Short-term memory loss;
  • Personality changes (e.g., unusual anger);
  • Confusing up or forgetting common-usage words and names; and
  • Disorientation and changes in depth perception.

Any of the signs above could be caused by dementia or many other problems. Talk to your parent’s physician and an elder law attorney. He or she can discuss the options, document your parent’s legal capacity, and get the right documents drafted quickly.

Reference: The (Bryan TX) Eagle (February 7, 2019) “MENTAL CLARITY: Shining a light on the capacity to sign Texas documents”

 

0 Comments

How Does a Life Estate Deed Work for an Executor?

What should this person do next? What is allowed and what is not? This complex question is addressed in My San Antonio’s article, “Life estate deed by agent must preserve estate plan.” First, let’s clarify what a life estate deed is, and why it was used in this person’s estate plan.

A life estate deed is a real estate ownership arrangement, by which the owner gifts or sells to someone, in this case to the beneficiary child, a “remainder interest” in a piece of real estate property. The owner of the property holds a “life estate” in the real estate, which includes the right to live in the property, use it and even profit from it, as long as the life estate holder is alive. The remainder interest holder, the heir, can’t interfere with the life estate holder’s use of the property, while they are living.

The remainder interest holder does have an ownership interest in the property, which is granted in the life estate deed. The IRS publishes a table so that the value of the remainder interest can be calculated. Here’s why that matters:

  • If the remainder is gifted, then the IRS table determines the gift tax amount.
  • If the property is sold while the life holder is alive, the proceeds are split with the remainder holder, with the value determined from the IRS tables.
  • If the life estate holder needs to apply for Medicaid, the gift value of the remainder will cause a disqualification.

If the life estate holder decides to sell the property, permission from the remainder holder is required. The life estate holder may not have to pay taxes, but the remainder interest holder is likely to owe capital gain taxes, if the property is sold.

There is a special type of estate deed which changes the description above. Known as an enhanced life estate deed, or a “lady bird deed,” the owner is given the right to cancel the deed at any time. Since there is no value transferred to the remainder holder, there is no gift tax, no disqualification from Medicaid and the life estate holder can sell without needing to obtain permission from the remainder holder.

In the example above, the father did not sell his life estate interest, but retained it until the date of his death. The first challenge is proving ownership of the property. The original life estate deed should be proof of the ownership, but it must be combined with proof of death. The official death certificate will be needed to be presented to the title company, which will establish ownership under the original life estate deed.

The Alzheimer’s diagnosis creates another hurdle. Title companies are cautious when circumstances could be interpreted as self-dealing. They may ask if the agent had preserved the principal’s estate plan. In other words, did the father’s will give the house to the agent or to someone else? The agent may not act in a way that violates the existing estate plan. The durable power of attorney must be recorded with the county clerk for the life estate deed to be valid.

This is a situation where a qualified estate planning attorney will be able to ensure that proper measures are taken to protect the heir, as well as the estate.

Reference: My San Antonio (Feb. 11, 2019) “Life estate deed by agent must preserve estate plan”

 

0 Comments

What Doesn’t Medicare Cover?

Medicare Part A and Part B are also known as Original Medicare or Traditional Medicare. These two parts cover a large portion of your medical expenses, after you turn age 65. Part A is hospital insurance that helps pay for inpatient hospital stays, stays in skilled nursing facilities, surgery, hospice care and even some home health care.

Part B is your medical insurance that helps pay for doctors’ visits, outpatient care, some preventive services and some medical equipment and supplies. Most seniors can enroll in Medicare three months before the month they turn 65.

Kiplinger’s article, “7 Things Medicare Doesn’t Cover,” takes a closer look at what isn’t covered by Medicare, plus information about supplemental insurance policies and strategies that can help cover the additional costs, so you don’t wind up with unanticipated medical bills in retirement.

Prescription Drugs. Medicare doesn’t provide coverage for outpatient prescription drugs. However, you can purchase a separate Part D prescription-drug policy for that or a Medicare Advantage plan that covers both medical and drug costs. You can sign up for Part D or Medicare Advantage coverage, when you enroll in Medicare or when you lose other drug coverage. You can switch policies during open enrollment each fall.

Long-Term Care. Medicare provides coverage for some skilled nursing services but not for custodial care. That includes things like help with bathing, dressing and other activities of daily living. However, you can purchase LTC insurance or a combination long-term-care and life insurance policy to cover these costs.

Deductibles and Co-Pays. Part A covers hospital stays and Part B covers doctors’ services and outpatient care. Nonetheless, you have to pay out-of-pocket for deductibles and co-payments. Note that over your lifetime, Medicare will only help pay for a total of 60 days beyond the 90-day limit (“lifetime reserve days”). After that, you’ll pay the full hospital cost. Part B typically covers 80% of doctors’ services, lab tests and x-rays. However, you must pay 20% of the costs, after a $183 deductible (in 2018). A Medigap (Medicare supplement) policy or Medicare Advantage plan can fill in the gaps, if you don’t have the supplemental coverage from a retiree health insurance policy. If you purchase a Medigap policy within six months of signing up for Medicare Part B, insurers can’t reject you or charge more because of preexisting conditions. Medicare Advantage plans have medical and drug coverage through a private insurer. They also may also provide additional coverage, like vision and dental care. You can switch Medicare Advantage plans annually in open enrollment.

Most Dental Care. Medicare will not provide coverage for routine dental visits, teeth cleanings, fillings, dentures or most tooth extractions. There are Medicare Advantage plans that cover basic cleanings and x-rays, but they usually have an annual coverage cap of about $1,500. You could also get coverage from a separate dental insurance policy or a dental discount plan.

Routine Vision Care.  Medicare doesn’t cover routine eye exams or glasses (exceptions include an annual eye exam, if you have diabetes or eyeglasses after certain kinds of cataract surgery). However, some Medicare Advantage plans give you vision coverage, or you may be able to purchase a separate supplemental policy that provides vision care alone or includes both dental and vision care. If you saved money in a health savings account before you enroll in Medicare, you can use the money tax-free at any point for glasses, contact lenses, prescription sunglasses, and other vision care out-of-pocket expenses.

Hearing Aids. Medicare doesn’t cover routine hearing exams or hearing aids, but some Medicare Advantage plans cover hearing aids and fitting exams, and some discount programs provide lower-cost hearing aids.

Medical Care Overseas. Medicare usually doesn’t cover care you receive while traveling outside of the U.S., except for very limited situations (like on a cruise ship within six hours of a U.S. port). However, Medigap plans C through G, M, and N cover 80% of the cost of emergency care abroad with a lifetime limit of $50,000. There are some Medicare Advantage plans that cover emergency care abroad. Another option is to purchase a travel insurance policy that covers some medical expenses, while you’re outside of the U.S.

Reference: Kiplinger (May 23, 2019) “7 Things Medicare Doesn’t Cover”

0 Comments