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Alzheimer's, Dementia, and Parkinson's Disease

- Douglas Scharre, MD

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- John Greener

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Caregiver Challenges

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Communication Through The Generations

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End-of-Life Issues

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Fitness

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Home Care Solutions

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Home Health Modifications

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Senior Housing Solutions

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Incontinence Issues

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Integrative Medicine

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Live In Care

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Managing Medicare

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Memory Care

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Mobility Issues

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Nutrition Know-How

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Quality of Life

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Safety and Hospitalization Concerns

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Senior Healthcare

- Archelle Georgiou, MD

Senior Medical Issues

- Chris Iliades, MD

Senior Transitions

- Mary Kay Buysse, MS

Asset Protection & Financial Management

John M. Greener, CPA, is the principal owner of A&E Business Advisors, Inc. The company was founded in 1992 to provide financial management and planning services for individuals, businesses, nonprofits and has a division just for elder services.
Q:

My mother is 80. She recently moved in with my sister and brother-in-law. We have found out from Mom that she has $22,000 plus in credit card bills. We are all wondering if and when she passes, are those bills going to become theirs? Also she is still legally married to my stepfather and has stayed married so that she remains on his insurance. Would her bills be his and his be hers in the case of death on either side? Thank you, Concerned Sister. 


Chris from WA
A:

Assuming that your mother’s credit card accounts are in her name alone, any obligation on her death will become a liability of (i.e. payable by) her estate. Ordinarily, amounts owed by her estate in excess of estate assets will not transfer to heirs or beneficiaries. Keep in mind though that credit card debt will ordinarily have to be paid before the distribution of any monies or assets to beneficiaries and could potentially directly reduce any and all estate distributions. Therefore, although you and your sister would not be responsible for your mother’s credit card debt, the debt may be paid from estate assets you may have otherwise inherited. The same result is generally true for other debts and obligations. The answer could be different for your stepfather especially in a community property state. I’ve located several articles that provide a more detailed discussion of the issues, including the possible consequences for your stepfather, which you may find helpful:

 

What happens to credit card debt after death
http://www.creditcards.com/credit-card-news/credit-card-debt-death-1282.php

You won't inherit Mom's credit card debt
http://www.bankrate.com/brm/news/debt/Sep06_Moms_credit_card_debt_a1.asp

Can credit card debt be inherited?
http://today.msnbc.msn.com/id/30831970/ns/today-money/t/money-can-credit-card-debt-be-inherited/#.T01CgnldCSo
 

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Q:

My mom has early AD, but still lives on her own at her insistence. She will not give my brother and I POA yet. We may get conservatorship. However, in the meantime, she is giving massive amounts of money to various family members, who are accepting it with no regard for her or her future. Do we have any recourse to get any of the money back? Please help. 


Sarah from CA
A:

The first issue, which you seem to have answered in part, is whether your mother is able to competently handle her personal affairs—particularly, her finances. It seems from your question that her stage of Alzheimer's disease (AD) is not the reason for your concern. There could be other causes that a person may be found incompetent and a guardian appointed, however getting to such a finding would not be a pleasant journey and pursuing it would ordinarily be one of the last considerations. Not meaning to dissuade you from this avenue entirely, you and your brother should get medical and legal counseling on this if you feel it should be pursued. Whether or not any monies could be recovered is a corresponding legal question, which may have to be handled in court.

There may be valid reasons why your mother is giving her money away, but it seems that you have reason to doubt that as well as her financial capacity to do so. If you have not already, you may want to openly discuss your concerns with your mother. If you and your brother are not able to do this, you may be able to enlist the help of someone she trusts. In many circumstances, this is an appropriate manner of dealing with sensitive issues, assuming there is full disclosure and no breach of confidences. It’s entirely possible that your mother has what she thinks are valid reasons for what she is doing. It is also possible that she does not completely understand the consequences. For example, it may be that your mother has Medicaid planning in mind. If you are not familiar with this, there is an article titled Medicaid Planning, which you can access on the website ElderLawAnswers.com at http://www.elderlawanswers.com/elder_info/medicaid-planning.asp.

As a closing note, everyone should understand the reasons to have and how to best execute a Power of Attorney (PoA), which will best serve their needs—if and when needed. Whether or not your mother has given someone her PoA and whether or not she chooses to give one to you and or your brother is a very personal decision, which should be carefully considered.
 

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Q:

My Mom and Dad own their home, but their health is declining. What should my two brothers and I do to protect their assets, should one of them have to go into a nursing home? Is there any type of trust that could be put into place to protect what Dad has worked his whole life for? 


Terri from VT
A:

As it seems you are well aware, Medicare does not pay for nursing home care, which is generally expensive and can quickly drain one’s life savings. In order to avoid that, many people employ strategies that are commonly referred to as “Medicaid Planning.” Medicaid will pay for nursing home care for those with nominal income and limited assets. While Medicaid Planning is not appropriate for everyone and some do not consider it ethical, it may be a consideration for your parents.


Medicaid Planning can be complicated and usually requires the transfer of assets. For this reason and others, you should seek the services of a qualified attorney who practices in this area in your state. You may want to explore this further on your own before going to an attorney so that you can be somewhat knowledgeable about the issues. You should also discuss this with your parents to see if they are open to considering this. If you (including your parents) decide to continue, you should have an exploratory consultation with an attorney before committing. As with any professional services, it is important to understand the fee structure and find someone you will trust. You should make certain that your parents are appropriately advised and are in agreement before any asset transfers.

Following are links to two articles posted on the website ElderLawAnswers. Although I cannot vouch for their accuracy or completeness, they are both good primers on the issues:
Medicaid Planning: http://www.elderlawanswers.com/elder_info/medicaid-planning.asp
Is Medicaid planning ethical?: http://www.elderlawanswers.com/resources/article.asp?id=1175&Section=4&state=
 

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Q:

Our elderly mother had an attorney draw up a deed of gift for her home about 6 years ago (my sibling and I are the recipients, we both live in a different state from our mother). Mom has the right to live there as long as she desires. The home is paid for. My sibling and I do not know if there is anything we need to do concerning this deed gift (do we have to officially "accept"this gift via any legal paperwork or is everything automatic since mom drew up the paperwork)? What are the pros and cons to this type of deed to both mom and us? I have read various takes on this and am confused. If in the future she has to go into a nursing home we were told her house could not be touched in order to pay nursing home bills. Is this indeed true? Also, what tax implications would my sibling and I occur as far as the home is concerned?
 


H. from VA
A:

These are valid concerns that need to be addressed with the specific facts. You should consult with a qualified attorney who can investigate the underlying facts. Any general answers may be misleading. You may want to start with the attorney who drew up the deed for your mother.

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Q:

My 73 year old stepfather has dementia; he was diagnosed 6 years ago. He took out a loan from Beneficial Finance 5 years ago. My sister is his POA and they won't give her any information on how much he owes. My sister is trying to help him because the house and the bills are becoming too much for him. My sister wants to sell the house and have him move in with her, but this loan pretty much has her hands tied. What should she do? 


Theresa from OH
A:

It seems that there may be a legal question about your stepfather’s competency at the time that he borrowed. This concern should be answered by an attorney knowledgeable about state statutes governing lending in your father’s situation. You could alternatively check with the office of your state attorney general. They should be able to assist you. You may also ask them what recourse they suggest in having the power of attorney recognized by the lender. Putting that issue aside, if you only need information on the loan balance, your sister may have better luck getting this information from the lender with your stepfather’s participation. If he is able, it may be as simple as handing the phone to your stepfather to confirm her authority during her phone call to the lender. Your sister may also try writing to the lender. She should include a copy of the power of attorney. Of course the loan documentation and account statements would also provide this information.

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Q:

What's the advantage of having the family home in one child's name, but wanting to sign up for VA Benefits for a surviving spouse who still has some cash income eaten up with medical expense and medical supply expenses as well as normal living expenses (food, insurances, prescriptions, etc)? Also I am curious about tax law that may affect the sale of the family home while it's in the child's name vs. the parent's name. 


Joanne from CA
A:

My understanding is that ownership of a family residence is not a consideration in VA benefit determinations. For a surviving spouse, if the veteran’s death did not occur in service, income and medical expenses are considered. Since there are many other considerations, you should speak with a VA counselor to fully explore benefits eligibility. It can be difficult to get though to a counselor but they are generally very helpful. The number to call is 1-800-827-1000. When you get to the menu prompt select option 1, then option 1 again and then option 2.

It seems that your second question is irrelevant if it only concerns VA benefits. If not, there are a whole host of issues to consider, not the least of which are the costs of transferring ownership and whether the home will qualify as the primary residence at the time of sale. In this regard, tax law currently provides an exclusion for gain on the sale of a primary residence.

As required by IRS Circular 230, you should be aware that any tax advice contained herein is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law providers.
 

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Q:

My mother owns two homes, which are adjacent. She and I reside in one—I have been providing supportive care; my brother and family reside in the second. She is currently in a nursing home for what we hope will be short term. If it is longer and we exhaust liquid assets, is there a means to preserve both homes for qualification for MAP? My brother's finances are limited, as are mine, but I have an investment. Would I be able to take from a 401K without a penalty in order to pay for care equivalent to the value of his home, thus preventing the need for it's sale and to provide him with a home? As a caregiver I believe Mother's home may be exempt (WI). Thank you for any help. 


Jim from WI
A:

As it seems you already know, there are income and asset limitations to be eligible for institutional care under Medicaid and similar state programs. Your mother may be able to transfer assets to meet the requirements, but the transfers would be subject to divestment rules which provide a look-back period in determining eligibility. The divestment rules may be different for community services that are not provided by a long term care program. Since Medicaid is a joint federal/state program, there are state specific rules which need to be considered. You may be able to get some assistance from a benefit specialist in your county however they are not usually able to advise you on specific instances of divestment. If your mother wants to consider transferring assets you should contact a local seniors’ advocacy organization or attorney with experience in estate and long term care planning.

Concerning early withdrawals from your 401(k), your plan may, but is not required to, provide for hardship distributions for medical expenses. One of the exceptions to the 10% additional tax for early distributions is for amounts not in excess of your unreimbursed medical expenses that are more than a certain percentage of your adjusted gross income. If your mother is your dependent, eligible medical expenses would include amounts paid for her. You can include in medical expenses the cost of medical care in a nursing home. This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care.

As required by IRS Circular 230, you should be aware that any tax advice contained herein is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law providers.
 

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Q: My mother-in-law is 71 years old and resides by herself. She just recently lost her job and on unemployment. She owns her own home, but we believe she is upside down on the mortgage. She has a little over 20K in her 401K. She states she has debt of over $85K. We are having her gather all her asset/expense information. We would like to sit with a professional that can review her financial status and provide us some options. I have called the area on aging, the State, the county. There seems to be a gap when it comes to seniors. Who is out there helping seniors that have no income and are about to lose everything? We were hoping that a third party could assess the situation, bring forward solutions and present her with a reality check.
Susan from MD
A:

I would start with the ElderCare Locator which is a public service of the US Department of Health and Human Services' Administration on Aging. The Eldercare Locator is designed to help older adults and their families identify trustworthy local support resources. You can access this by going to http://www.ElderCare.gov or by calling 800.677.1116. If you have already done this, you may need to be more persistent in pursuing the contacts provided. There may also be other resources depending on your mother-in-law's needs. As you know, it's important to first get a handle on the situation and do a needs assessment. Are there expenses which can be brought under control or where some public assistance may be available? Once you have all the pertinent information together, if you are still not able to find a public assistance resource, you may find a local banker who is willing to sit down with you and explore options. Including your mother-in-law in this process may go a long way to helping her deal with her circumstances. If you haven't yet, try to have an open discussion with your mother-in-law. Talk about some of the alternatives which may be available and get her thoughts on her options. 

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Q: We interviewed a nice woman to take care of Mom & Dad, but she said she wanted to be paid “off the books.” What does that mean?
A:

You should start by asking her what she means by that because it can mean different things to different people. What it really means is that there is no formal record kept of payments and no reporting of payments to the IRS or state taxing authorities, which in most cases would not be legal and is inadvisable for many reasons. She could be meaning instead that she does not want to be treated as an employee and have payroll taxes withheld although she will report the earnings on her personal tax returns as an independent contractor. This may be permissible, but there are very specific rules regarding household employment that need to be considered.

The rules on household employment can be quite involved since you need to consider the federal (IRS) and state requirements. You first need to determine if the care provider should be treated as an employee. Generally, the IRS says that if you are able to control what work he or she did and how he or she did it, you have a household employee. This is true even if you give the employee freedom of action. What matters is whether you have the right to control the details of how the work was done. If they are not technically an employee they would ordinarily be considered an independent contractor who you would issue a Form 1099 to and report the payments to the IRS. There may also be state reporting requirements.

If they are an employee you need to look carefully at all the federal and state employment tax and reporting requirements. A good starting point for federal is IRS Form Schedule H, the Schedule H instructions and Publication 926 – Household Employer’s Tax Guide. You will need to contact state taxing authorities to determine their requirements. There may be multiple agencies which handle employment taxes in your state.

Although employment tax reporting can be burdensome and add significantly to the cost of household help, it is advisable to “go by the book” on these matters. There are substantial penalties for not following the rules as well as other reasons such as personal liability for employment injuries which might otherwise be avoided.

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Q: The bank sent Dad a letter that his account was being turned over to the State. How can they do that?
A:

What is most likely happening is that the money in your Dad’s account is “escheating” to the state because the bank considers the account to be unclaimed. Escheat is the transfer of property to the state when the person dies intestate (without a will) without any other person as heir. For example, state statute might provide that when someone is not survived by a spouse, descendants, parents, grandparents, descendants of parents, children or grandchildren of grandparents, or great-grandchildren of grandparents, then the person's property will escheat to the state.

Escheat can also occur when a bank account goes unclaimed. In many jurisdictions, if the owner cannot be located, the account holdings are revocably transferred, or escheated, to the state government. The escheating criteria are ruled by individual states’ laws and regulations.

States’ laws also require investment companies, insurance companies, utilities, and other businesses to turn dormant accounts, unclaimed insurance and stock dividends and other inactive holdings over to the state. If there has been no activity in an account for a set period of time, usually two to five years, the assets in the account are considered unclaimed or abandoned. There are usually attempts to notify the account holder before unclaimed funds are turned over to the state.

If the bank has already turned over the account to the state you usually have to contact state authorities to recover the funds. The bank should be able to tell you who to contact. You should first contact the bank to see if that has occurred. If it hasn’t you may be able to stop that action by writing a letter or filling out their form to reactivate the account.

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Q: My brother and I are concerned about Mom’s & Dad’s finances, but every time we bring up the subject they shut down. What can we do?
A:

This is a very common situation that can be difficult to overcome. It is often complicated by family dynamics. You first need to consider who should be involved in this process and how they should be involved. This can be the most difficult part of the process.

Are there other siblings to consider, such as a stepbrother or another sister who clearly would not be able to chip in when it comes time to helping out Mom & Dad with their expenses? How can you bring in a brother whom you haven’t spoken with in ten years? You should start by talking this through with your brother and then meet as a family to evaluate the circumstances and how to proceed. You may decide that there is an urgency to the matter or that it’s premature to be concerned. As it’s sometimes said, “timing is everything.”

Assuming that there is a present need to have a conversation, decide on the five W’s – what, why, who, when and where? You’ll want to be able to explain to Mom and/or Dad – that being a decision unto itself – what you want to talk about and why you feel the need to have the conversation. Don’t go in with a personal agenda. Be honest and open – and listen carefully to what’s being said. The who part could be decided based on personal dynamics, family hierarchy or ability and willingness. It might also be appropriate to enlist the aid of a disinterested third party such as your parents’ attorney or accountant. The when and where parts are important for trying to have a relaxed and comfortable conversation.

There can many benefits to dealing with the financial concerns you may have for your parents’ well-being. It is important to do this with care and planning. You may want to get a legal or financial professional to help you with the process.

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Q: Mother is having difficulty keeping track of their finances. Dad had been taking care of all that, but he’s no longer able. What should we do?
A:

There are a number of options you may have depending on the complexity of your parents’ financial maintenance needs and their openness. Assuming your parents are receptive to your help, you first have to understand their needs.

You should first gather and review their records. Dad may have detailed everything long ago, anticipating that this time would come. You’ll need to know their income and expenses. You may already have a pretty good idea, but you should do some investigating. Start with their primary bank accounts and look at their deposits, withdrawals and payments. Then look at any other cash accounts and receipts for income and expenses. Next, look at their credit cards. From this information, update records that may have been kept and create a list of income and expenses covering at least a year and a half – preferably from October to the second following March. Also look at the more recent transactions to see if there are any new or unusual items. This will give you some comfort that most, if not all, of the relevant recurring items have been captured. Next create a list of assets including approximate values and amounts owed.

At this point you will have a pretty good idea of the complexity and can decide if you have the skill and time to handle it or need help. For help you can ask for referrals from financial professionals you know such as your tax accountant, banker or insurance agent. Other sources would be bookkeeping services which you may find in your local classified ads. Do the appropriate validations before sharing any financial information.

Other considerations are whether you will need a power of attorney and signatory authority on the accounts. Good financial maintenance is a key to asset protection and preservation.

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