I. Background - What is Elder Law
Elder law is a relatively new and very interesting field that seems to be attracting lawyers from other practice areas. That was my path to elder law. For the first part of my career, I practiced mostly in large corporate settings, working primarily on commercial real estate and corporate transactions. Overtime, I decided that I wanted to leave the big firm experience and start my own practice. I had always been interested in tax and estate planning. Since I had a life-long affinity for grandparents and grandparent-like figures, elder law was appealing. But, when I started out in elder law, no one warned me that the field was extremely complex and difficult to master, and that I would be faced with ethical challenges in almost every engagement.
There are three areas where I see most of the ethical issues I come across:
- Mistakes - Work done by other attorneys who make mistakes because they are trying to practice elder law, on the fly, without having committed to spending the necessary hours of time learning the law, reading cases, articles, statutes and attending continuing education classes.
- Money - Caregivers, family members, and relative strangers who want to get their hands on the elder person's money. This most often presents as individuals trying to gain control with powers of attorney for property. Powers of attorney for property are essential for Medicaid and asset protection planning, but can expose clients to great potential for abuse.
- Capacity - Issues of capacity often span across generations. I sometimes meet with adult children who do not realize their elderly parents are competent and insist their parents are losing it, when they are perfectly capable of signing estate planning documents. These same kids are often suffering from their own psychological issues or disabilities. Sometimes, people with significant issues present as being totally normal, and it takes careful attention to figure out family dynamics and who the bad actors may be.
II. Elder Law is Trendy - Don't Practice on the Fly.
It's all over the media that the baby boomer generation is now aging and is a huge consumer group for products and services, including elder law. The statistics back up the media hype. Perhaps this trendiness is one reason that on a regular basis I often come across mistakes made by other attorneys, without sufficient background in elder law. Ethically, attorneys should only represent clients when they have the knowledge to handle the matter. The ABA Model Rule of Professional Conduct provides:
Rule 1.1 Competence
A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation
Because elder law is a trendy area, I believe there is an increased risk of younger lawyers (and more experienced lawyers looking to expand or change practice areas) to jump in without realizing the great complexity involved, including the federal and state statutory framework, federal and state regulations, and the ever-changing case law. Attached as Exhibit A, are resources I recommend as helpful to learn the elder law area. In addition, below is a list of matters that the typical elder law client may need help with, and what an elder law attorney should generally know about, although it's not critical to master every area (for example, I refer out all guardianship and litigation work).
A: Estate planning, with a focus on potential future disability (special needs), long-term care, and Medicaid/asset protection planning, including:
- Drafting powers of attorney to allow for gifting and Medicaid planning, while preventing theft and preserving the estate plan.
- Drafting advance health care directives, taking into account the client's desires and continual advances in medicine, which makes it difficult to predict what medical treatments will be available in the future and will also be in conformity with the client's current wishes.
- Special needs trusts, including spousal testamentary, third party and self-settled pay-back (OBRA) trusts.
- Understanding income tax issues that relate to gifting before death (for Medicaid planning), and tax issues upon death.
- IRAs and required minimum distributions.
- Estate planning to avoid family fights, and especially fights over how best to take care of aging parents.
- Funeral, memorial and cremation planning.
- Guardianship and avoiding guardianship.
- Probate and contested estates.
B: Medicaid, Medicare and Long-term care planning, including:
- Medicaid eligibility - laws vary by state but must comply with federal law.
- Medicaid civil rights law - this is a growing and important area.
- Administrative law for appeals of Medicaid applications.
- VA Benefits.
- Family and third-party caregiver agreements.
- Rental agreements for when the older person lives with an adult child.
- Medicare coverage, advocacy and appeals.
- Facility agreements with nursing homes, assisted living and continuous care communities.
- Litigation and contested matters involving nursing homes, health care providers.
- Long-term care insurance.
C. Guardianship and avoiding guardianship, including:
- Understanding the various options for limited guardianships.
- Understanding issues of incapacity.
- Familiarity with elder care professionals such as care managers and professional fiduciaries who can serve as private guardians or as agents for “orphan” elderly.
- Working with geriatric health and psychiatric experts.
III. Common Mistakes Made by Lawyers
(and persons trying to be their own lawyer).
Lawyers that do not primarily practice elder law often have elderly clients, and with the best intentions, try to help them with complicated elder law issues. These are some common misconceptions about elder law:
- Revocable living trusts protect assets from Medicaid - wrong
- Irrevocable Trusts with HEMS and other “support” provisions are not countable assets for Medicaid - wrong
- A “quitclaim deed” somehow has magical powers that gets the asset out of the elderly person's name and protects the property from Medicaid recovery - wrong
- A person's home is protected from Medicaid forever - as long as they have the “intent to return home” - wrong in most states
- A person cannot qualify for Medicaid if they have any assets - wrong
- It's too late to protect assets if an elderly person is already in a nursing home - wrong
- It's okay to have more than one power of attorney for property (i.e. more than one adult child on different powers of attorney) - wrong
- A power of attorney allows the agent to due anything they want - wrong
- If grandma cannot remember what she ate for breakfast, she is not competent, and a guardianship is needed - wrong most times
- A guardianship fixes everything - wrong most times
Elder law is such a complex field, that it is easy for even experienced attorneys to make serious mistakes. These are some examples of other lawyers' work I have corrected during the past year. These lawyers were intelligent and well-intentioned. They had their client's best interests in mind, but did not have sufficient background to properly perform the work. All personal details and some facts have been changed to protect the identities of the people involved:
A. Caregiver Child - Not a Caregiver Child
A very competent and caring local real estate attorney tried to help his client, was hired for a closing but, somewhat unknowingly, was pulled into Medicaid planning. His client had elderly parents, who had recently entered a nursing home. The client had read about the “caregiver child” exception to the Medicaid rules on the Internet and asked the attorney to set up an irrevocable trust to own a new condo that his parents were planning to buy for him, with the proceeds from the sale of their home. The caregiver child exception to Medicaid was briefly mentioned by the client, but apparently glossed over. The client did not fully explain to the attorney that he was trying to use the caregiver child exception to help preserve the value of his parent's home, and the attorney did not know the right questions to ask.
The caregiver child exception allows the transfer, without penalty, of an elderly person's primary residence to a child who took care of parents for the prior two years, if the care enabled the parent to stay out of a nursing home. See, 42 USC 1396p(c)(2)(A)(iv). The care does not have to be provided full-time for 24 hours a day, but it must be very significant. There may also be state specific rules and case law for the caregiver child exception. For example, recent NJ cases, have set forth strict conditions for using the caregiver child exception. See, M.K. v. Division of Medical Assistance and Health Services, N.J. Super. Ct., App. Div., No. A-0790-14T3, May 13, 2016, and V.P. v. Dept. of Human Services (N.J. Sup. Ct., App. Div., No. A-2362-09T1, Sept. 2, 2011).
In addition to specific requirements for the amount of time the child spent providing care, the federal statute is very specific and does not allow for the purchase of a new property, or for the transfer of the property to a trust. The statute only applies to the transfer of existing home, where the parent and caregiver child lived together. The transfer of a new condo to an irrevocable trust was not a transfer to the caregiver child. Instead, it was a transfer not for value (i.e. a gift), which caused a Medicaid penalty, because the transfer occurred during the 5-year look back period.
After the real estate transaction had taken place, the “caregiver child” came to see me for help with Medicaid planning for his parents, assuming that the condo would be an exempt asset. Upon further discussion, I learned that the “caregiver child” had, in fact, been working full-time during the two-year period and had not been taking care of his parents for more than a few hours a week. There is no case law that supports someone working full-time to qualify as a “caregiver child.” Also, while his mail was sent to the parent's home, which would have been good evidence of his residence there, he didn't actually live at the parents' house full-time. He stayed at his girlfriend's home most nights of the week. Even if the real estate transactions could have been un-done, I did not feel that I could in good faith represent that client.
Ethically, there may be concerns that a client could be using an elder law attorney to submit a fraudulent Medicaid application. It is something to keep in mind when interviewing potential Medicaid planning clients. In this case there were many red flags, not the least of which was this client's determination to use his real estate lawyer to set up an irrevocable trust and waiting to engage an elder law attorney, only just before he wanted to help his parents to apply for Medicaid. When I pointed out that he didn't meet the legal qualifications for the caregiver child exception, he went elsewhere. That was fine with me. Watch out for dishonest clients trying to take advantage of the Medicaid system. I have rarely come across this type of situation, but it's important to keep your eyes open and avoid taking on clients who want to cheat the system.
B. Faulty Special Needs Trust and Faulty Powers of Attorney.
Client's husband had dementia for many years by the time she came to see me. They had substantial assets (over $1 million), but not enough to pay for private nursing home care for the rest of the husband's life. Client's estate plan was prepared by an out of state attorney who did not understand the federal Medicaid laws, regarding countable assets and testamentary special needs trusts for spouses. One of my favorite planning techniques is using a testamentary special needs trust to protect assets for the surviving ill spouse. This is most logical to use when one spouse has an acute and serious fatal illness, and the other spouse has a disability that is not immediately life-threatening, but will eventually requires costly nursing home care, such as Alzheimer's. It also makes sense to use a testamentary special needs trust, even if one spouse is well, when the other spouse is in a nursing home and on Medicaid, to avoid the sick spouse losing Medicaid eligibility, if the healthy spouse dies first. It's not uncommon for the well spouse to pre-decease the sick spouse. Caregiver spouses, sadly, sometimes wear themselves out. If you use this technique, be careful to pay attention to your state's requirements regarding inheritance of the “spousal share.”
“For purposes of this subsection, an individual shall be considered to have established a trust if assets of the individual were used to form all or part of the corpus of the trust and if any of the following individuals established such trust other than by will:” 42 U.S.C. Section 1396p(d)(2)(A).
The emphasized language means that unless the special needs trust is testamentary (within a will) the trust will be a countable asset for Medicaid. Instead of using a testamentary special needs trust, the lawyer put the special needs trust into the wife's revocable living trust. That structure could have blown $1 million for the client, if the wife died first, because Medicaid would have considered the assets available. I revised the estate plan to put the special needs trust into the wife's will. The lawyer also failed to include the power to make gifts in the property power of attorney. The gifting power is usually necessary for emergency Medicaid planning, which takes place within the five-year look back period. Because the sick spouse had children from a former marriage, this gifting power had to be restricted to follow the sick spouse's intent to provide for the children from his prior marriage.
IV. Watch Out for Greedy Caregivers, Greedy Children and Greedy Strangers.
Over the years, I have been shocked to see how greedy people can be, even adult children of the elderly. Knowing who you represent is an extremely important part of elder law practice, and greedy people may try to manipulate elder law attorneys. Often, the first phone call I receive is from an adult child of the elderly person. Most elder law attorneys take the position that they represent the elderly person, no matter who calls to make the initial appointment, or who brings the elderly person to the office.
Ethics/practice tip: It's very important to meet with elderly clients alone, and hopefully far from the influence of the adult children, who sometimes have their own agendas. You should always make it clear who you are representing and meet with the elderly person alone. When necessary, I also make it clear to the adult children that it is my job is to protect their parent's money for their parent's future care and that they have no right to their parent's money.
Here are some case studies that illustrate common ethical challenges in elder law practice:
A. Greedy Adult Children
I set up an estate plan for an elderly couple who had an adult daughter they didn't trust with money. The daughter had never grown up and was both floundering in various business ventures and living an extravagant lifestyle, still asking her elderly parents for money. So, the husband chose a corporate fiduciary to be the agent under his property power of attorney and the trustee of his revocable living trust. He had a serious terminal illness and wanted to make sure his wife (who had early onset dementia) would be able to remain in Chicago, and stay in their apartment with full-time caregivers, for as long a possible. The wife, although suffering with dementia still maintained her strong personality and was adamant that she did not want to move to east coast (where her daughter lived), after her husband died. She was happy in Chicago and had a nice group of friends.
Since my work with the family began, the father's illness had worsened, and the daughter pressured/convinced her parents to move to the east coast. I heard nothing until about one year later when the daughter called me from the east coast frantic to change her parents' estate plan, in order to remove the corporate trustee/agent so that she could be the trustee/agent and “take care of them.” She was emotional and practically hysterical and demanded that the estate plan had to be changed. She started screaming at me and told me that her mother didn't need “all that money.” She was so adamant that I change the estate plan to give her control over her parents' money, that she offered to fly me to the east coast to work with them. Of course, I refused and explained that I represented the parents and had set up their estate plan in accordance with their wishes, and that it would be unethical for me to change the estate plan under pressure without clear direction from the clients.
Eventually, I learned that the daughter hired an east coast attorney, who charged $10,000 to prepare a new estate plan for her parents, naming her as trustee and agent. His work completely undid my plan which included a testamentary special needs trust for the wife and exposed all of the assets to Medicaid countability. The father was actually in and out of consciousness in the hospital, while these changes were made to his estate plan and he signed all of the papers literally on his death bed. The poor wife was left with minimal assets, no special needs trust, in a tiny apartment, with minimal caregivers, and isolated from her Chicago friends. She had no support system, except for her greedy daughter.
I was deeply concerned about the actions of both the daughter and the new lawyer. I had spent much time of the phone with the new lawyer, trying to explain the testamentary special needs trust, and why it was a good thing. The new lawyer was adamant that a revocable living trust would work out just fine. He didn't understand the law and seemed to think that it was easier to do what the daughter wanted and make $10,000 - that is until the daughter's husband came to his office and threatened to kill him and terrified the entire office staff with physical threats. Apparently, he was not working fast enough for the daughter who was trying to get the estate plan changed before her father died.
Interestingly, the reason the client hired me in the first place was that he wasn't happy with his first estate planning lawyer. His first lawyer spent three years on and off working on the client's estate plan, and literally had the unsigned will in his desk drawer when I was hired. That attorney had set up a third party special needs trust for the husband with wife as beneficiary, because he thought it would protect the trust assets from Medicaid. The lawyer was not familiar with the federal law regarding testamentary spousal special needs trusts (42 U.S.C. Section 1396p(d)(2)(A)). Fortunately, the client was a smart man, and in reading a draft of the trust he wondered why the word “child” appeared repeatedly, and the word “spouse” was not consistently used in the document. I read the trust and immediately realized that the prior attorney had taken a form for a third party special needs trust for a child, incorrectly thinking he could adapt it for use between spouses. Big mistake. He charged the clients to prepare a special needs trust that would be a countable asset for Medicaid purposes.
Ethics/practice tip: When dealing with elderly clients, time is of the essence. If you cannot prepare powers of attorney and estate planning documents in a timely manner, don't take the engagement. It's not fair to let an elderly client wait months for their estate planning documents. Also, if the elderly clients are taking an unusually long time to make decisions on trustees, agents, etc. that can be a sign of dementia. I sometimes give my elderly (and also younger) clients time limits for making choices to help keep the estate planning process moving along. They appreciate the structure and my efforts to keep things on track.
B. Elder Orphan Cheated by Greedy Banker/ “Friend”
As a solo practitioner who answers my own phone, I get a lot of interesting calls. But, sometimes I think I should post a banner on my website that says:
“PLEASE DO NOT CALL IF YOU ARE TRYING TO STEAL MONEY FROM YOUR PARENTS OR THE PERSON YOU ARE TAKING CARE OF”
Someday one of these callers may end up in jail. Recently, a man called asking if I do powers of attorney. He said his elderly “friend” was in a nursing home and needed a power of attorney and a will. I asked if he was the caregiver and he said no - he was just a friend. Sounded straightforward enough. So, I went to the nursing home where the friend greeted me with a huge smile and threw into the conversation that he needed me to prepare a deed so that his friend could transfer her house to him. I explained I that had to see the elderly person alone.
In my brief conversation with the elder client, I learned that she had no children and had been widowed about a year ago. She met the “friend” because he had been her personal banker at a large national financial institution. She thought he was a wonderful person and gifted almost $1,000,000 to him over the course of a year. During that time, the “friend” had quit his job and had, in fact, taken on significant caregiver responsibilities for her, including helping the woman shop, cook and take care of her home. This created a situation where she felt dependent on him, since she had no family in town and no children. Unfortunately, his care-giving wasn't so great, because she ended up falling and being left alone, with no assistance, for close to 24 hours. That's how she ended up injured and recovering in a nursing home. The sad fact is that she had plenty of money to hire qualified live-in help and a geriatric care manager. But she had no one looking out for her to help her hire professional help and keep the fraudster/banker out of her life.
After realizing that the woman most likely lacked competency (it was not easy to call, she could recite her life story in detail and could account for all of her varied assets and real estate holdings) and that this “friend” was taking advantage of her, I called the Cook County Public Guardian's office. The Public Guardian did a great job of taking fast action and had her bank accounts frozen within days. They also made sure she was getting the proper health care. It turns out that the friend had a police record and had swindled several other elders by ingratiating himself as their trusted personal banker.
Ethics/practice tip: Learn about local resources (both government and non-profit) who can help “orphan” elders, who are especially vulnerable to elder abuse - both financial and physical. Public guardians in some jurisdictions, such as Cook County, Illinois, have excellent reputations and do great work. Unfortunately, that is not true in all communities. Also, cities and towns often have their own departments of aging, which may be smaller and more responsive than larger state agencies. States and large counties also have departments on aging. These government agencies can step in to evaluate competency and help with providing social services.
For example, see:
- Illinois Department on Aging at: https://www2.illinois.gov/aging/Pages/default.aspx
- City of Chicago Senior Services at: https://www.cityofchicago.org/city/en/depts/fss/provdrs/senior.html
- Village of Skokie, IL Senior Services at: http://www.skokie.org/hssenior.cfm
- City of Highland Park, IL Senior Center at: https://www.cityhpil.com/resident/senior_center/index.php
The City of Highland Park, IL (where I grew up:) recently did a wonderful job assisting me with helping for an elderly resident, who had no family. The police department was happy to do a wellness check, and the City of Highland Park Senior Center (staffed by social workers) helped me cut through some state red-tape and get the elder evaluated for services. The police in Highland Park told me that they are overwhelmed by the needs of the elderly population. It's a sad situation. There are so many elderly people on their own and there is a huge need for volunteers to help. The reason I got involved in this situation is also a good elder abuse warning story. I was called by a local real estate agent, who asked me a lot of questions about Medicaid and how to move an elderly woman out of her house and into a nursing home. Through several conversations, I learned that the realtor seemed to be pressuring the woman to sell her valuable property for a cut-rate price to a local land developer. That's what can happen when the elderly have no friends or family in their lives.
C. Powers of Attorney for Property - Not Just a Form
I believe that drafting powers of attorney for property are the most important document in an estate plan, because they come into play when the client is most vulnerable - still living but incapacitated. Many attorneys do not realize the importance of properly drafted powers of attorney. For example, I recently had a discussion with a real estate lawyer who was trying to help an elderly woman, who had no children but did have a live-in caregiver. He had the woman sign a property power of attorney, so that he could close her real estate transaction. He had never met with her in person, but instead faxed the power of attorney form to her caregiver for her to sign. This lawyer had no idea that what he had done was not only unethical - because he failed to meet with the woman in person to determine her capacity - but that by signing the new power of attorney she revoked her prior power of attorney which named a long-time trusted friend to be her agent. In my opinion, it was a disaster of a situation. The woman was a recluse and it would be very difficult to have her sign yet another power of attorney correcting the situation.
Without properly drafted powers of attorney, there is often no chance to protect assets when planning is needed for long-term skilled care. Money runs out very quickly, when a client needs to be in a nursing home. In most states a nursing home resident on Medicaid is allowed a very small monthly stipend for personal needs. In Illinois that amount is just $30 per month. Even the best nursing homes don't provide everything a client may need, and which the family may not think of, to benefit the patient's comfort and quality of life. This could include non-covered health care expenses such as massage, skin care, vitamins, supplements, acupuncture, manicures, pedicures, hair-cuts, etc.
In addition, the small Medicaid personal needs allowance will not come close to covering the costs of a patient advocate and/or geriatric care manager. If you are not familiar with these professionals, you should make sure to get acquainted with the local care managers in your area. A good resource to locate care managers is the Aging Life Care Association at: www.aginglifecare.org. I have found that clients receive better care in nursing homes when there is a professional patient advocate or geriatric care manager involved, who attends care planning meetings and stops by to check on the patient at least once a month. With some asset protection planning, there can be money available to pay for extras which will enrich the patient's quality of life. Just because someone is living in a nursing home does not mean they cannot benefit from extra care and personal items such as books, electronics, and even paid companionship.
Most importantly, never print out powers of attorney from a form book and use them without reading the applicable statute, case law and thoroughly understanding what you are doing. State laws may prohibit certain powers altogether, but some powers and other attributes can be added to the forms. For example, gifting is an important part of asset protection planning for Medicaid. The power to make gifts should be included in the property power of attorney for clients who are concerned about protecting assets from long-term care costs and qualifying for Medicaid to pay for nursing home costs.
However, gifting powers can easily be abused, and may also be restricted by statute and case law. Some states may bar an agent from making gifts to himself or herself, and from changing beneficiary designations. For example, a recent Illinois case explains that self-dealing by an agent under a property power of attorney (which could include making gifts to oneself) is presumed to be fraudulent and held that the agent could not change a beneficiary designation on an IRA to herself, without explicit authority to do so under the property power of attorney. Collins v. Noltensmeier, IL App (4th) No. 170443, April 5, 2018. Also see, In re Estate of Shelton, 2017 IL 121199.
Here is an example of suggested gifting language, which may be used in a property power of attorney for Medicaid and asset protection planning, but be sure to scrutinize and personalize the language for your client's situation and your state's specific laws:
“My agent, in consultation with an elder law attorney and as part of a long-term care and Medicaid plan, and for the purpose of protecting my best interests and my legacy for future generations, has the authority to make gifts of any of my assets to my children, in equal shares, per stirpes, or to an irrevocable trust for the benefit of my children in equal shares, per stirpes. I specifically acknowledge that my agent is one of my children and authorize my agent to make a gift to himself or herself, but only in accordance with the requirements of the preceding sentence.”
Ethics/practice tip: Gifting is a complicated and risky Medicaid/asset protection strategy, with tax and other issues involved. There is a significant risk of abuse with all powers of attorney, but especially those that allow for gifting. Each power of attorney should be crafted for the client's specific goals and situation. Gifting powers may not be appropriate in every situation.