Another attorney recently shared the following case with me. His client, a women in her early 60s who was suffering from the early stages of Alzheimer’s, had been placed in a nursing home. Her children came to him because the cost of her care was rapidly depleting her assets to the tune of $3,000-$4,000 per month. The children asked him if there was anything he (the attorney) could do to protect Mom’s remaining assets. Unfortunately, in this case it was too late for him to do anything for her, but his story pointed out some things that I thought might be worth sharing with you.

In this case, the client and her husband thought they had taken all the necessary steps to protect their assets. They had contacted an estate planning attorney and told him of their concerns. The husband, who had noticed his wife seemed to be forgetting things such as the names of people of old and dear friends and even the names of the places they regularly frequented, had begun to worry about what she would do if something happened to him. He wanted to be sure that whatever estate plan they put in place would take care of her needs if she should need assistance in the future.

The couple explained all this to the attorney and made a point of telling him that the husband’s father had died at an early age. Since the husband was already slightly older than his father had been when he died, the couple wanted to be sure the wife’s needs would be met if something happened to the husband.

The couple also explained to the attorney that they were worried about nursing home costs eating up all their assets. They wanted to know there would be something available to meet unexpected needs and wanted to do whatever was necessary now so this wouldn’t be a problem later.

The Estate Plan

The attorney they had gone to very carefully reviewed their situation with them and they were confident that he understood their needs and concerns. They left confident that everything would be all right.

Some time later the attorney called them back in and reviewed the revocable trust which he had prepared on their behalf. He pointed out that the trust included "special needs" language which would take effect if Mom should survive the husband and require assistance. After the attorney explained the plan to them, the couple executed the trust and felt sure all their needs had been met. They put the trust in their safety deposit box and forgot about it.

Everything went along fine for several more years. Then Dad suddenly died without warning of a heart attack. Mom, who had depended on him for everything, was a wreck, but she was able to continue on with her life through the help of her children.

Mom’s forgetfulness continued to worsen and her children finally decided to have her evaluated. The results of the medical tests was just as they feared–Mom was diagnosed with advanced stages of Alzheimer’s. The children thought they could handle this, too, and at first they were able to make it work. The children took turns caring for her, but soon this proved too much even for this loving family. Mom no longer recognized them, couldn’t handle even the simplest chore by herself, and sometimes became angry and violent. The children finally decided it wa time to move her into a nursing home where all of her needs could be meet.

The children confidently filled out the Medicaid application form and provided DHS with a copy of their mother’s trust. To their chagrin, her application was rejected. Although Mom had been assured by her attorney that the special needs trust was exempt from DHS consideration, it wasn’t. The attorney had not carefully reviewed "all" of the requirements for a special needs trust to be exempt. While federal law allows for the creation of a special needs trust for a spouse, the trust must be a testamentary trust (one created by Will). Since this trust was a revocable trust, all of the trust assets were countable and Mom was disqualified for Medicaid.

The children quickly contacted the attorney who shared this story and asked him if anything could be done. The new attorney quickly checked Mom’s power of attorney to see if it would allow her agent to give away her remaining assets and qualify her for Medicaid in 36 months–it didn’t. All the children could do was watch as their mother’s assets were slowly depleted to pay for her nursing home care and medication. Because the children have limited assets of their own, once Mom’s funds are gone they won’t be able to supplement her Medicaid benefits if mom should need anything extra.

Mom and Dad did everything right. They consulted with an estate planning attorney. They outlined to the attorney their issues and concerns. They listened carefully while the attorney explained how their estate plan would work and only then executed the documents. The problem wasn’t with Mom and Dad–it was with the attorney. He didn’t understand the Medicaid rules. While he thought he knew what was needed, because his knowledge of the Medicaid rules was incomplete his surviving client and her family are paying the price.

This isn’t the typical case where the client fails to act. They did all the right things except choose the right attorney. They weren’t attorneys so they didn’t know what he proposed wouldn’t work.

If you should find yourself in a similar situation, ask pointed questions of the attorney and your friends and acquaintances. Is the attorney experienced in dealing with Elder Law cases. How many such plans has he prepared? Does he have these plans reviewed and approved by the general counsel who advises DHS on Medicaid eligibility? If you ask the tough questions and receive the right answers, you should avoid the issues which Mom and her family are now confronting.

© Jerry E. Shiles 2004

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