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Legal Planning for Incapacity: Part 2

When a loved one is diagnosed with a progressive and debilitating illness, it is devastating, both for the individual and the family that loves him or her. One of the many stressors with this type of diagnosis is the practicality of and sensitivity surrounding preparation for the day they are no longer lucid. Another complication that arises for families is trying to determine how to pay for long-term care. As a result, the process of legal planning for incapacity can understandably feel ruthless.

While it’s easy to feel overwhelmed by the many legal and financial questions that can arise as a result of the diagnosis, it’s important to set aside fear and have these conversations as early as possible. This is to ensure you have the best chance of knowing and honoring their wishes for their life, care, and property. For all these questions and more, it is important to find an attorney with the expertise to advise on these topics and one with whom you feel comfortable discussing them. In this article, we’ll go through the things you should consider in a Q&A format using frequently asked questions from others who have been in your shoes.

Note: Before you get started on this article, you may find it helpful to pull up our glossary of terms in a separate window for easy reference.

Question 1: What legal matters should be discussed when a family member has a health condition that affects his ability to function independently?

There are several legal issues to consider when a person is (or may become) incapacitated:

  • The management of the person’s financial affairs during his or her lifetime

  • The management of the person’s personal care: medical decisions, residence, placement in a nursing facility, etc.

  • Arranging for payment of long-term health care: use of private insurance, Medicare, Medicaid (Medi-Cal in California), and Supplemental Security Income (SSI) when applicable

  • Preserving the family assets: ensuring that the patient’s spouse and any disabled family members are adequately protected

  • The distribution of the person’s assets on his or her death. (If the person has a disabled spouse, child, or other family members that they wish to provide for, special arrangements need to be made.)

In addition to issues that are clearly “legal” in nature, other important issues should be discussed in the course of legal planning. For example, you should plan to have a full discussion of housing options i.e., is the person planning to stay in his/her home? Is this feasible, both physically and financially? Is he thinking of moving to a retirement facility? What level of care is provided? Is it a rental or a “buy-in” arrangement? Is a move to a nursing home probable?

Click here for more information on finding live-in/residential care options.

Question 2: When should an attorney be consulted?

As quickly as possible. These matters take time to sort out, and the more of it you give yourself and your loved one, the more options you’ll all have. To create legally binding arrangements, the patient needs to be of sound mind. This is why you’ll want to start as soon as possible - far more options are available while the patient still has the legal capacity to make his or her own decisions.

Note: The question of capacity is a gray area and must be determined on a case-by-case basis.

Question 3: What are the options for managing assets?

Options for managing assets include:

  • Durable Powers of Attorney

  • Revocable living trusts

  • Designation of a representative payee

  • Conservatorship (or Guardianship) of the estate and the person

Each of these has advantages and disadvantages, which should be discussed thoroughly with an attorney.

Question 4: What are the options for managing medical decisions?

For medical decisions, you should discuss the use of a durable power of attorney for health care, directive to physicians, and conservatorship (or guardianship) of the person.

Question 5: What are the options for paying for long-term care?

Investigate first the availability of private insurance to cover long-term care, whether at home or an assisted living or skilled nursing facility. You should then examine the government benefit programs that may help pay for care such as:

  • Medicare

  • Medicaid or Medi-Cal

  • Supplemental Security Income (SSI)

  • In-Home Supportive Services (IHSS)

Note: If the person served in the United States Military, federal or state veteran assistance may be available.

Question 6: Can any assets be protected (for a spouse, for example) if a patient needs long-term custodial care in a skilled nursing facility?

Various planning options may be available to finance long-term care. These options greatly depend on the unique circumstances; i.e., marital status, mental capacity, age and health of the care recipient, and, most importantly, the applicable law in the state where the individual resides. The rules regarding planning vary from state to state.

Planning options can include:

  • Converting non-exempt assets into exempt assets

  • Transfer of the family residence to a spouse

  • Transfer of the principal residence with the retention of a life estate

  • Use of court orders to increase the proportional amount of available resources and/or income the spouse of a nursing home resident can retain

  • Trusts

  • Gifting of assets

A good attorney should be able to help you explore your options and work through this process with you. Each of these options has significant implications and, again, should be thoroughly discussed with an attorney knowledgeable in elder and Medicaid law.

Question 7: How can an individual provide for the distribution of his or her property upon death?

The options for distributing assets on death include:

  • Will

  • Revocable Living Trust

  • Joint Tenancy Accounts

  • Payable on Death Accounts

  • Transfer with a Retained Life Estate

Each of these has significant legal and tax ramifications and should be discussed with a knowledgeable attorney and financial advisor or accountant. In addition to the listed, some financial products (such as life insurance, IRA’s, and annuities) provide for the distribution upon death to a designated beneficiary.

Question 8: How do you find an attorney to assist with legal planning?

There are many ways to find an attorney, many of which we detailed for you in this guide.

Note: It is important to check the qualifications of an attorney and to do your due diligence. Make a few calls to other attorneys to compare fees and experience. The National Academy of Elder Law Attorneys may also be able to help you find a qualified attorney.

Keep in mind that laws vary from state to state.

Question 9: What kind of attorney should be consulted?

Most attorneys concentrate on one or two areas of law. Caregivers need to find an attorney who has the appropriate expertise. Attorneys advising caregivers on planning for long-term care should know the following areas of law:

  • Medicaid (Medi-Cal) laws and regulations

  • Social Security

  • Trusts (special needs trusts)

  • Conservatorships

  • Durable power of attorney (for health care and asset management)

  • Tax (income, estate, and gift) planning

  • Housing and health care contracts

Some attorneys are certified as specialists. For example, an attorney can be a certified specialist in elder law, taxation, or estate planning. It’s also possible that you need more than one attorney specializing in different aspects of your case in more complicated situations.

Note: In the case of an accident, for example, a personal injury attorney is needed. In that case, it is advisable to select someone who has had jury trial experience. In the case of a personal injury, two attorneys may be needed—one to litigate an accident settlement and another to help plan for long-term financial or health care needs.

Question 10: What should you do to prepare for a legal consultation?

It’s helpful to have a clear idea of what you would like as the outcome of a legal consultation—that is, what you would like to gain from the appointment. Learning as much as possible ahead of time will help ensure a productive consultation.

Items to Bring to the Consultation

  • List of major assets (real estate, stocks, cash, jewelry, insurance, etc.)

  • Any documents of title (e.g., copies of deeds, stock certificates, loan papers, etc.) which show who the asset owners are and how the title is held

  • Contracts or other legally binding documents

  • Lists of all major debts

  • Existing wills or Durable Powers of Attorney

  • Bank statements, passbooks, CDs, etc. which show who the asset owners are and how the title is held.

For More Information

If you provide regular care to your loved one, we at CRC Orange County are here for you. We invite you to check out our library of information for family caregivers by clicking here for further reading and resources. You are also welcome to give us a call at 800-543-8312 to find out more about how we can support you in your caregiving journey.


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