ASK A LAWYER: PLANNING WITH A DEMENTIA DIAGNOSIS
By Kim K. Steffan, Attorney
Has a loved one recently been diagnosed with dementia? You’re not alone. A recent study reported there were 6.5 million Americans (10.7% of those 65 and over) living with Alzheimer’s in 2022. Alzheimer’s accounts for 60-70% of dementia cases. Some patients are diagnosed with early onset dementia before age 65. Knowing you have company may not ease dealing with it first-hand, though.
In legal and financial planning with dementia, time is not on your side and delay is not your friend. That said, take time to get good professional advice before acting. Too many times I’ve seen fallout from acting on a well-intentioned family member saying, “Let’s get all the assets out of Mom’s name now, and our problems are solved.” Many mistakes cannot be undone.
- Get a durable power of attorney (POA) and health care power of attorney (HCPOA) in place. Your loved one can only sign a valid POA or HCPOA when they are still mentally competent. Sooner is better. A time will come when they can no longer sign a POA or HCPOA. If they haven’t signed one by then, the family will have to do a guardianship process with the Clerk of Court instead, which is expensive and time-consuming compared to a POA. Some dementia patients have good days and bad days; they may be mentally competent to sign the POA and HCPOA some days, and not on others. Since lawyers cannot allow someone to sign if they do not appear to be competent, using an attorney can help avoid challenges to the documents later. Getting a doctor’s note just ahead of signing can also help uphold the document later.
- Your loved one may want to make or update a Will while they can. They may find it comforting to know that, when they are gone, their wishes will be carried out for inheritance and who will be in charge of this. Like the POA and HCPOA, a Will cannot be signed if dementia has advanced to the point where mental capacity is gone. If a Will contest is expected, an attorney who prepared the Will can serve as one of the best witnesses of competency.
- What is mental competence for signing a POA, HCPOA, or Will? To be competent to sign any of these, a person needs to know who’s who among their family or loved ones. For a POA, they must know generally what things they own and whom they’d like to help them with finances and property. For a HCPOA, they must be able to say whom they’d like to make medical decisions if they become unable to. For a Will, they must know generally what they own, where they’d like it to go after their death, and whom they’d like to handle that.
- Medicaid planning is a specialty. Some families of dementia patients want Medicaid planning to preserve a homeplace and still qualify for Medicaid paying for long-term care. Consult an attorney who specializes in Medicaid planning (not me) for complete information before deciding. Medicaid planning can sometimes be done on the eve of moving your loved one to assisted living, but sooner is better. Don’t just deed the homeplace to a family member. Medicaid looks back 5 years; during that time, they treat that deed as if it didn’t happen.
- Important considerations about deeding property away, aside from Medicaid issues. If the homeplace has appreciated a lot in value since your loved one purchased it, family members who will end up with the homeplace likely do better tax-wise if they inherit it through a Will than if they receive it by deed during your loved one’s lifetime. This is because of basis rules involved in capital gains tax. Get advice before making a poor tax-planning decision that costs the family money.
Good resources include attorneys, financial planners, accountants, and the Orange County Department on Aging. It is fine to ask attorneys about their fees before scheduling with them.
Kim K. Steffan is an attorney with Steffan & Associates, P.C. in Hillsborough. She can be reached at (919) 732-7300 or firstname.lastname@example.org.