Early Planning, Lasting Protection

Dec. 28–The dementia hitting many seniors across the country means that grown children are springing into action to handle their parents’ legal and financial matters.

Experts say there is much money to handle and protect — money needed to pay for a senior’s care or intended as inheritances.

Despite these tough economic times, many middle- to upper-class people in their 70s and 80s remain relatively unscathed. They typically already own their houses and other real estate, and their money was in more stable investments when the economic downturn hit in 2008. Plus, since many grew up in the Great Depression era, they often are conservative with their money and have socked away plenty. Many also receive pensions that employers increasingly no longer offer, and they receive full Social Security benefits that younger people aren’t sure will exist when they reach retirement.

“We have many people who are down on their luck or unemployed, who are closing in on the current elderly population,” said Kate Mewhinney , director of the Elder Law Clinic at Wake Forest University. “The wealth transfer from today’s elderly is huge.”

Children of the elderly need to stay on top of their parents’ finances, said Deborah Hall , director of Senior Financial Care, a nonprofit that helps seniors with their finances. “If you start seeing bills pile up and checks bouncing due to insufficient funds, that’s usually a sign that something is going in the wrong direction.”

With her two sisters, Wendy Wallace-Banks of Winston-Salem helps takes care of her mother, who has Alzheimer’s.

“I know one thing: If you can get all of your parents’ finances straightened out while their mind is still sharp, that’s a huge advantage,” Wallace-Banks said. “Once that mind is gone, those finances and legal things are extremely difficult to handle.”

Perhaps the most important thing a family can do when dealing with a parent suffering from memory loss is to create a power-of-attorney agreement. In this legal document, which must be filed with the local clerk of court, a person — usually a grown child — is named as someone who can act legally for the parent. Those actions include most legal functions, including writing checks, selling property and incurring debt.

Most agreements are “durable” powers of attorney, allowing the agent to act if the elderly person becomes incompetent.

“Each one is written differently,” said Grecia Gaura , a long-term-care ombudsman in Forsyth County. “It just depends on what you want it to say.”

The power of attorney must be signed by the elderly person while mentally competent.

If the family doesn’t get around to a power of attorney until the parent is no longer competent, a guardianship is the next option. It is a legal procedure in which someone is named to handle the affairs of a person deemed incompetent.

“Usually the elderly person has to undergo an evaluation, to prove that they are incompetent,” Gaura said.

The exact moment a person becomes incompetent, of course, is up for debate, with the elderly person and the family often disagreeing. A trusted family adviser, such as a doctor, can step in to help with the evaluation, Mewhinney said.

Handling the transfer of oversight of a parent’s finances with care can keep both a family and its resources intact. A battle regarding competency, guardianship and money can drain funds from the estate and rip a family apart. “Oftentimes, lawyers get rich when families argue,” Mewhinney said.

Bills and financial accounts

If an elderly person has family members close by and memory loss has begun, he should be willing to share financial information with the children. “But sometimes they don’t want to,” said Hall of Senior Financial Care.

Her agency’s goal is to help the elderly with money management so they can live independently. Hall’s staffers visit seniors’ homes to help with tasks such as monthly check-writing and reconciling bank statements.

Hall recommends getting the person’s bills paid by automatic draft. “You don’t want to be in jeopardy of the utilities being cut off,” she said.

Family members don’t have to have their names on the account. They can just help the parent pay their bills. They also can maintain the website logins and passwords, and check for any unusual activity.

Hall warns people to be very careful of joint accounts and comingled funds. “We want the client to retain as much control as possible,” she said. “You have to be very careful about who is listed on the account with you, as they could divert funds to their own needs.”

But if a joint account is the solution for your family, the two people need to go to the bank together and set it up together.

“Get everything organized as soon as the person starts to lose memory, because everything can get disorganized very quickly,” Hall said. Many times when her workers arrive, “we are trying to cobble together bank statements and find out where all the savings are tucked away.”

Seniors with cognitive disorders have trouble organizing things, so paperwork may be all over the house.

Hall’s staffers work with the elderly person to create a list of assets and liabilities, and a list of investments and real estate. They also can help seniors who are struggling to make ends meet develop a budget. The seniors might be spending more than they should on housing and could qualify for a facility that bases rent on income. Or they may be paying for a land line and a cellphone when they don’t need both, Hall said

In some cases, a relative of an elderly person can be named the representative payee for the person’s Social Security checks. This designation is not covered under the power of attorney.

“They will pay for the person’s expenses out of that check,” Hall said, and must account for how they spend the money.

Potential for fraud

Hall said one thing her workers continually see at elderly people’s homes are piles of junk mail, including charity solicitations, sweepstakes and financial offers, and free gifts, such as personalized mailing labels.

They may also be receiving solicitation phone calls.

“We get them on the do-not-call registry and the registry to stop junk mail,” she said. “We’re in their home every month, and we try to help them identify things that are not legitimate, so they know what to tear up.”

The elderly, with more free time, may over-analyze each piece of mail. “This is how they get sucked in,” Hall said.

Regarding free gifts via mail, in which solicitors ask for a contribution, many times seniors feel they need to give something in return, she said.

“We recommend that they choose two or three charities in their local community that they know something about, and donate to those,” Hall said. “That way, they know where their money is going.”

Scammers try to ingratiate themselves with older people, with the intent of fraud.

“Many an elderly person has been cheated when a member of the opposite sex begins to pay a lot of attention to them,” Mewhinney said. “You even need to watch out for a grandchild who never paid attention to his grandmother before.”

Paying for long-term care

Strict rules are in place regarding payments for nursing-home care, Mewhinney said.

The parent cannot simply give away his house and assets to children, then present himself as a poor Medicaid patient to get the government to pay the bills for the rest of his life in an assisted-living or nursing home.

“Now when you apply for Medicaid for assisted living or a nursing home, they look back three to five years,” Mewhinney said. “Did Mom give anything of value away? Or sell a home for less than it was worth? If so, you will be disqualified for Medicaid assistance.”

But the rules are complicated, and most families need to contact a lawyer to go over their particular case, she said. “It’s a huge can of worms explaining the Medicaid rules.”

Mewhinney does not recommend that elderly parents give away all their money to children in an attempt to avoid their estate paying for their long-term care. Some parents give away their money to a grown child, with the expectation that the child will pay for their long-term care with that money.

“But then the daughter buys a boat with Dad’s money, or the daughter gets a divorce and soon-to-be ex-husband gets half of Dad’s money,” she said. “They could die, divorce or have a falling out. Lawyers are busy with all these kind of scenarios.”

Don’t count on long-term-care insurance, either, as something that will fund all of the elderly person’s expenses in an assisted-living or nursing home.

“Some insurance companies have stopped selling long-term-care insurance,” Mewhinney said. “Even the actuaries cannot accurately predict how long today’s elderly will live, and many are getting out of that business.”

—— afuller@wsjournal.com

(336) 727-7389

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What can you do when your loved one can no longer manage his own affairs? If he can still make some decisions and communicate, he could appoint someone to handle his affairs; this is usually done by signing a power of attorney. But if the person can no longer understand and make decisions, a guardianship may be necessary. Your relative’s doctor and a lawyer can help determine which is better.

Guardianship

A guardianship is a legal procedure in which one person is appointed by a court to make decisions for someone who no longer can do so for himself. There are three types of guardians:

— A guardian of the person is appointed when a person cannot take care of his or her own personal needs, such as medical care.

— A guardian of the estate is appointed when a person cannot handle his own business or financial affairs.

— A general guardian is someone who acts in both roles.

A person will be declared incompetent and in need of a guardian if he can’t make or communicate decisions about his health, property or family.

A lawyer is not usually required to ask to be appointed as guardian. The forms can be obtained from your local courthouse. Most courts will require a doctor’s letter.

If your loved one does not have a lawyer, the court will appoint one at the hearing. The temporary person is called a guardian ad litem. The incompetent person also has a right to have a personal lawyer at the hearing. A jury trial or broad evaluation of competency may be requested.

If you are appointed as a general guardian or guardian of the estate, you will need court permission for many financial transactions on the relative’s behalf. A guardian of an estate must manage the person’s business and financial affairs and report receipts, payments and other transactions each year.

Power of attorney

If the relative can understand legal documents, a power of attorney may be preferable to a guardianship so that the relative can choose who handles his affairs. The court is not involved.

The relative must be mentally competent and understand what he is signing to grant power of attorney. This can be done before he loses mental capacity or during a lucid period. A doctor can help determine capacity.

A medical opinion is helpful for those with a disease such as Alzheimer’s that gets worse over time, in case the person later challenges the power of attorney.

Probably the most useful type of document is the durable power of attorney, with language that clearly states it remains in effect after the relative becomes incompetent. Otherwise, the power of attorney loses validity when the relative becomes incompetent.

The person with the power of attorney is called the agent, who must be trusted with the power to write the person’s checks, sell property and incur debt.

The Social Security Administration does not recognize power of attorney. You will need to become your relative’s representative payee, which allows you to receive and spend their check. You need to account in a report for how you spend the money.

A health-care power of attorney also is useful. Your loved one can sign this document if he is mentally competent or during a period when he is mentally alert. It allows you to make health-care decisions for the person.

Source: Wake Forest University Elder Law Clinic

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