I am age 87, retired and disabled. My wife is 78 and working part-time but looks forward to retiring soon. We own a home with a substantial mortgage, have a modest IRA, and about $70,000 in savings. We are being hit by excessive, crushing health insurance costs and our resources and social security income now are not quite enough to maintain a decent living standard. Our daughter has offered to help and we have discussed lending our savings to her business long term at 10% interest, which would be taxable income to us. Our daughter is also willing and able to donate some 'gift money', if needed. Any alternate ideas? Can I structure a plan where there will be no tax on the interest income? Or some kind of gift arrangement that would better?

Generally, we would advise against intra-family loans where this is your total life savings you're putting at risk. What happens if your daughter’s business stops doing as well as it has and she can no longer pay you 10% or perhaps even pay back the money you deposit with her. Why not leave the $70,000 in an FDIC insured bank account and let your daughter make gifts to you and your wife, if she can afford to do so?  Your daughter can give each of you $13,000 a year gift_tax free. If she is married, she can give you twice that amount.

But there may be better alternatives.  First, you and your wife may borrow money on your home either from in bank through a traditional mortgage or line of credit or through a reverse mortgage.  Reverse mortgages are available for seniors who cannot qualify for traditional bank financing.  They have always been treated as last resorts in large part due to their cost, but the cost has recently come down, making them more attractive.  However, you can usually borrow only about half of the equity in your home under a reverse mortgage and the loan must be paid back after you and your wife move out of the house for any reason.

Another alternative would be for your daughter to lend you the money you need, but for there to be a promissory note a mortgage so that she gets paid back when the house is sold.  We call this a “private” reverse mortgages.  This approach has many advantages:

1. It is cheaper than a bank loan or commercial reverse mortgage. 

2. Your daughter can lend you as much as you need and she can afford, not just up to half the equity in the home.

3. There’s no forced sale of the house at what may be an inopportune time. 

4. Your daughter will be repaid what she lends to you, which can help avoid complications with siblings, if you have other children. 

5. This can also provide some Medicaid protection if you or your wife ever need nursing home care.

However you choose to go ahead, you should document it in writing so that you make sure that everyone has the same understanding of what the deal is. An elder law attorney can help with this process and make sure that the agreement meets all necessary legal requirements.

With the prevalence of both divorce and longevity, later in life marriages and relationships are more and more common. They can be wonderful experiences for the participants and for their families, bringing love, companionship, and new experiences to one’s later years. But they can also bring on legal, financial and caregiving complications that would not be present in a first marriage, especially when one partner becomes ill.

The Situation

The experience of my client, who I will call Janet (all of the names are changed), is a case in point. Her father, Bob, a retired professor, has lived with Rita, a semi-retired attorney, for the past 15 years. They are in their late 70s and early 80s and, unfortunately, both are beginning to show signs of dementia, Bob more obviously than Rita.

Janet was concerned about both Bob’s care and his finances. It was not at all clear that he was taking his medications as prescribed and his cleanliness left a lot to be desired. Rita didn’t seem to be up to managing Bob’s care and both resented any intrusions by Janet.

The situation was further complicated by the fact that several years ago Bob loaned Rita a substantial sum of money to renovate her home and more recently made her a sizable gift to permit her to pay off her mortgage. While Bob is free to do what he wants with his money, the situation raises questions of capacity and undue influence.

Finally, Janet lives several hours away and has a tense relationship with Rita’s daughter and, especially, with Rita’s son-in-law, both of whom are heavily involved in Rita’s day-to-day life. To heighten Janet’s concerns, she learned that Rita recently had transferred the house, which was security for the loan from Bob, to her daughter.

The combination of all of these factors has made it difficult for Janet to intervene on Bob’s behalf. She wants to stay involved to make sure that Bob gets the care he needs and that no more of his savings get siphoned off. But being aggressive, such as seeking guardianship over Bob, could alienate everyone and disrupt Bob’s living situation.

The Solution

So what can Janet do now and what could Bob have done in the past to improve the situation? Fortunately, Bob did take some steps when he was legally competent to put Janet in a position to act on his behalf now.

Bob had named Janet as his agent on his health care proxy and durable power of attorney. This has enabled her to monitor his investments and to communicate with his physician. It has also enabled her to use Bob’s savings to take the next step.

Janet hired a geriatric care manager to monitor the situation in Bob and Rita’s home and to make sure that Bob gets to his medical appointments. The care manager has also arranged to hire a home health worker a few hours a day to make sure that Bob bathes, gets at least one square meal a day, and takes his medications as prescribed. This intervention has been an important step in relieving Janet’s anxiety.

However, Janet is aware that the situation will likely deteriorate, meaning greater intervention on her part down the road. She may ultimately have to seek guardianship over Bob in order to move him to a safer living situation if he refuses when the time comes. This would also give her sole control over Bob’s finances, preserving them from any further invasion by Rita.

What else could Bob have done to protect himself and his family? In terms of estate planning, Janet would have greater control if Bob’s savings were held in a revocable trust and he had named Janet as co-trustee. We don’t know whether he would have wanted such involvement by her when he was competent.

Further, if Rita and Bob had sat down with an attorney to determine their financial agreement in terms of living expenses and house renovations, there would be no suspicion that Rita took advantage of Bob – or she may have been prevented from doing so.

In short, blending families complicates finances and legalities, making it more important than ever that the new couple plan ahead for themselves and for their families. The more they can put in writing and the more they tell their families about what they want should they become incapacitated, the more likely they will be to avoid difficulties should they need care.

Harry Margolis founded Margolis & Bloom LLP, a six-lawyer Boston law firm in 1987. He has been a designated “Super Lawyer” since 2005 and is Founder and President of ElderLawAnswers that supports seniors, their families and their attorneys by providing various online tools and resources.

Last month, I visited the first nursing home that I actually wouldn’t mind living in myself some day. The Leonard Florence Center for Living in Chelsea, Massachusetts (just over the Tobin Bridge from Boston) is built on the “Green House” model pioneered by Dr. William Thomas, a geriatric specialist from Sherburne, New York.

All rooms are private!  And they are designed in units of 10, all organized around a common area that includes a kitchen, dining area and living room. The aides are trained to cook and food is commonly available so that residents can eat what they want, when they want.

Each 10-room unit is designed for patients with similar disabilities. Thus a younger resident with ALS or multiple sclerosis lives with similar individuals, rather than being placed with older residents suffering from dementia.

This is a far cry from the typical institutional nature of nursing facilities where everyone must fit into the facility’s schedule, rather than the other way around.  To be certified as a “Green House” nursing home, the facility must meet certain criteria. Each unit must be created for six to 10 residents and contain a hearth and outdoor space as well as a kitchen and common area.

There are currently 29 communities of Green Houses in 19 U.S. states, including Alaska, Montana, Michigan, Ohio, New York, and Florida. Thomas estimates that Green Houses will be built in every state in the next five years and 160,000 will go up in the next 20 years.

A typical Green House runs about 5,500 square feet and is located near a church or residential community. The Leonard Florence Center I visited is the first urban Green House nursing home.  Green Houses have gardens or pets if the residents want them and also provide services that the residents specifically request, such as rehabilitative care and programs for people with Alzheimer's and developmental disabilities.

Thomas says that a Green House allows residents to make personal choices. The Green House model aims to upend the traditional idea of a nursing home as a “place to die” and make it instead a place to live.

"We are attempting to de-industrialize long-term care," he declares.

"Every person who lives there has a private room and bathroom," he says. "All of the food is cooked in the house. Strangers are not allowed to come into the house without knocking at the door and being invited in."

These simple features give the seniors privacy and space that nursing homes lack, Thomas notes.

"In a typical nursing home, the architecture reinforces the idea that staff efficiency is paramount," says Thomas. "In the Green House, the architecture is designed to maximize wellbeing for the people who live and work there. You can give elder care in a non-institutional, community-based setting even while [adhering] to nursing home regulations."

The concept of Green Houses has been developed partly through the Eden Alternative, a non-profit organization that Thomas founded to focus on improving long-term care for seniors. The Green House Project is funded by the Robert Wood Johnson Foundation and is organized through NCB Capital Impact, a non-profit arm of the National Consumer Cooperative Bank, which provides consulting help and pre-development loans to organizations that want to establish Green Houses. So far the list of organizations that have set up Green Houses includes churches and ministries, nursing homes, counties, medical care facilities, and not-for-profits that serve people with developmental disabilities.

This level of privacy and individual attention doesn’t come cheap. The Leonard Florence Center charges $425 a day to private-pay residents, but it also accepts Medicare and Medicaid.

I have seen the future and it’s not half bad. They even have a day spa!

To learn more about Green House nursing homes, go to www.thegreenhouseproject.org.

Harry Margolis founded Margolis & Bloom LLP, a six-lawyer Boston law firm in 1987. He has been a designated “Super Lawyer” since 2005 and is Founder and President of ElderLawAnswers that supports seniors, their families and their attorneys by providing various online tools and resources.

As highlighted in a recent article in The New York Times, an increasing number of seniors who need assistance are receiving that care from other seniors.  Most commonly the caregivers are the spouses of the care recipients, but older paid providers are a close second.

In fact, it’s not unusual for someone in her 80s to be cared for by a paid caregiver in her 60s or 70s. The article reports that in 2008, 28 percent of home care aides were over age 55.  It goes on to say that by 2018, nearly one out of every three caregivers will be older direct care workers.

Older workers fill the paid caregiver role for a number of reasons. 

Some need the income, and the part-time nature of the work fits their schedule and energy level.  Also, if they receive Social Security benefits and are under the age of 70, their monthly benefit may be reduced if they earn too much. In cases like this, a part-time job is their only option if they want to avoid sacrificing their Social Security checks.

Others simply enjoy the work and being useful to others.  Often, they started out as caregivers for family members and continued in the role when their family members stopped needing the care.  And some seniors who need assistance feel more comfortable receiving it from someone closer to their own age.

Whether you’re a senior providing unpaid care to a family member or an older worker employed as a caregiver, considering the following issues can make the process work better for all concerned:

• Follow the employment laws.  If the care provider is not a family member, the employer must follow all of the state and federal laws for employers, including providing workers' compensation and unemployment insurance, and paying the employer’s share of FICA (this is the so-called “nanny tax” and it applies to child care workers, home care aides, and even housekeepers).
• Pace yourself.  Whether you are providing care to a family member or are a paid caregiver, don’t take on too much.  It won’t help you or the person you care for if you are injured, ill, or simply lose your patience because you’re exhausted.  Take on what you can handle and get help, whether paid or from other family members, as needed to make the system work for everyone.
• Check out the Medicaid program.  Increasingly, states are expanding the home care they provide through their Medicaid programs, allowing at least some subsidies for in-home care, in some cases even to family members.  Check with state or community senior agencies or with an elder law attorney to learn what is available where you live.
• Don’t earn too much.  As mentioned above, those workers who have elected to receive Social Security benefits before age 70 will lose some of their monthly payments if they earn too much.  For those who have not yet reached their full retirement age (66 for those born between 1943 and 1954), the deduction is $1 of benefit for every $2 earned over $14,160.  During the year of one's full retirement age, the deduction is $1 for every $3 earned over $37,680, until the month a beneficiary reaches full retirement age.  Once a beneficiary reaches full retirement age, benefits are no longer reduced due to income.

Harry Margolis founded Margolis & Bloom LLP, a six-lawyer Boston law firm in 1987. He has been a designated “Super Lawyer” since 2005 and is Founder and President of ElderLawAnswers that supports seniors, their families and their attorneys by providing various online tools and resources.

With enactment of health care reform, voters can finally learn what’s in the new law.  Up until now, the continuing uncertainty allowed everyone to apply their best hopes and worst fears to the various proposals.

As with just about everything coming out of Congress, health care reform is a compromise, meaning that it ends up being neither anyone’s best hope or worst fear.  It does, however, make a lot of changes in our health care system.

The biggest changes for Americans under age 65 will be that they cannot be denied insurance due to preexisting conditions and that everyone will be required to have insurance, with subsidies for those who can’t afford the premiums.

For those over age 65, the law would includes the following elements:

• Deficit reduction.  While the bill would spend more money due to its providing coverage to an additional 35 million Americans, it also includes many provisions that will either cut costs or produce new revenue.  As a result, according to the latest estimates by the Congressional Budget Office, the Senate version will save $118 billion over 10 years.
• Medicare.  Most of the costs savings are in the Medicare program, a fact which has made many seniors fearful that their benefits will be cut.  In addition, the plan calls for an increased Medicare premium for those individuals earning more than $200,000 a year and married couples whose income exceeds $250,000.  A combination of the additional revenue and savings are estimated to extend the life of the Medicare Part A trust fund for an additional 7 to 10 years from its current insolvency date of 2017.

The cost saving measures do not affect the basic Medicare benefits to which all enrollees are entitled.  However, those enrolled in Medicare Advantage plans may lose some extras they offer, such as reimbursement for gym membership, free eyeglasses, and other incentives to join their programs.

The reason for this is that up until now, Medicare has paid insurers who offer these plans on average $135 a month more than they spend on other Medicare beneficiaries.  The original idea of Medicare Advantage was to save money by paying them less, the idea being that private insurers could be more efficient than the federal government.  The opposite turned out to be the case.  Health care reform would pay the private insurers the same amount Medicare spends on other beneficiaries, meaning that some insurers will choose not continue their Medicare Advantage plans and others will curtail extra benefits they offer enrollees.

There are many other changes in the law aimed and curtailing costs and improving care, such as a program for doctors and hospitals to coordinate care after a patient’s hospitalization to try to avoid the all to frequent quick return to the hospital.

• The Donut Hole: As all seniors know, the Medicare Part D prescription drug program covers medications up to $2,830 a year, and then stops until the beneficiary’s out-of-pocket cost reaches $4,550 in the year, at which point coverage begins again.  The gap is known as the “Donut Hole,” into which many seniors fall around Labor Day, at which point they have to pay for the medications out of pocket through the end of the year.  While the Senate bill (which has been turned into law) does not close the Donut Hill, the House reconciliation bill still awaiting a vote by the Senate would close the gap.
• The CLASS Act.  Health care reform contains a limited long-term care benefit championed by Senator Ted Kennedy before his death, and known as the CLASS Act, which stands for the Community Living Assistance Services and Supports Act.  It would provide every American taxpayer they opportunity to set aside a monthly sum of between $50 and $100 to be drawn on for long-term care costs, whether at home or in an assisted living or nursing facility.  The payments coming out would be around $50 day, but in many cases this can make all of the difference between being able to stay at home and having to move to a nursing home.  Everyone will have to pay into the program for at least five years before they can begin drawing benefits.

It’s an opt-out program, meaning that while it’s voluntary, the premium will be deducted from your paycheck (if you’re working) unless you choose not to participate.  Some have expressed fears that so-called adverse selection could undermine the program.  In other words, only those likely to need care in five years will enroll – especially those who are turned down for private long-term care insurance due to preexisting conditions – and all of the healthy younger taxpayers will opt out of a program that they don’t anticipate needing for at least 40 years.  The result could be that not enough money comes in to pay out to the people who need support.

During its long gestation, health care reform came under attack from the left as being inadequate because it still leaves most of health care in the hands of private insurance, and under attack from the right as a government takeover of health insurance.  It was hard for the voter to know who to believe, which left many to conclude that they were better off if Congress didn’t act.  Now that Congress has taken this step, it will take up to four years for all of the features of the new law to take effect.  It may take us even longer turn learn and understand all of its consequences.  No doubt, adjustments will be needed to make it work as well as possible.

Harry Margolis founded Margolis & Bloom LLP, a six-lawyer Boston law firm in 1987. He has been a designated “Super Lawyer” since 2005 and is Founder and President of ElderLawAnswers that supports seniors, their families and their attorneys by providing various online tools and resources.

My client came to see me at her wits end about what to do about her father.  He was suffering from early Alzheimer’s disease, but would not accept help.  He ate irregularly and was losing weight.  He refused to give up driving, although he had gotten lost several times.  My client had a power of attorney for her father, but was sure that if she used it, he would revoke it.

Advanced age, unfortunately, is often accompanied by dementia, whether from Alzheimer’s disease, strokes, small and large, or any of a number of other illnesses.  By some measures, half of those over 85 suffer from dementia.  The more severe the dementia, the more assistance seniors need getting through the day.

Seniors with dementia can also be at great physical and financial risk due to their own risky decisions and their susceptibility to abuse, either physical or financial.  Depending on the situation, protecting seniors with cognitive impairment, as well as those around them, can be difficult.

What can family members do when a parent should stop driving, but refuses to do so?  What if the parent responds to every telephone solicitation that comes their way?  What if a loved one refuses help in the house or resists moving to an assisted living facility? 

In many instances, seniors can be cajoled to do what’s best for them—but as with my client, that’s not always the case.  In such instances, there is the legal remedy of guardianship.  Unfortunately, as we shall see, the law can be a blunt instrument.

Every American has the right to determine where she will live, who can come into her home, and how she will spend her money.  This personal autonomy can only be taken away by a court’s determination that an individual is so impaired that she will be injured unless someone is appointed to step into her shoes and make decisions for her.
                               
What is Guardianship?

The person the court appoints is named either a “guardian” or “conservator” depending on the state’s nomenclature and rights transferred.  In many states, a “guardian” is appointed to make personal decisions, such as where the protected person will live and what health care she will receive, while the “conservator” makes financial and legal decisions.  The two roles can be filled by separate people or by the same person.

Guardianship proceedings are problematic on a number of levels.

• They take away the protected person’s rights – he can no longer make decisions for himself. 
• He is declared to be incompetent, which can be hurtful. 
• There is the cost of hiring attorneys and doctors to get through the process.
• The protected person’s situation and finances become part of the public record and the guardian and conservator must make annual reports to the court.
• Finally, depending on the state, many financial and estate planning steps that may be advisable can only be taken with court approval, which causes delay and increases legal fees.

In my client’s case, she was sure that if she sought guardianship, her father would be very angry and fight the appointment.  This would add to the time spent on getting court approval and correspondingly to our charges as attorneys.  It could also create a rift between my client and her father which may or may not heal over time.

Avoiding Guardianship

So, if guardianship and conservatorship are so difficult why does anyone use these procedures?  The answer is either because there is no alternative or due to lack of planning.

Often, guardianship and conservatorship can be avoided through estate planning while the senior is healthy and competent.  By appointing personal representatives through durable powers of attorney, health care proxies and trusts, an individual can choose who will make decisions for him before he is no longer able to do so.  This can avoid family disputes and the cost and delay of guardianship proceedings.  It can also give the appointed person more freedom to take the appropriate steps to protect the senior.

Nevertheless, even with proper planning, family members sometimes have to resort to the courts.  This is often the case when the senior has become obstreperous and is putting himself or others in danger, as in the case of my client’s father, or when a third party is unduly influencing the senior.  In those instances, going to court may be the only solution.

I advised my client that she really had no choice but to act or her father and, potentially other drivers and pedestrians, are at great risk.

In terms of the car, we took two steps.   We notified the department of motor vehicles that he was at risk so that they would ask the father to come in for a test.  And my client removed the carburetor from the car.  While her father was upset, he could not determine why the car would not start.

To protect most of her father’s funds, with the cooperation of her other siblings, our client used her durable power of attorney to move them to a separate account in her father’s name.  She left a limited amount of funds in his bank account that he could control and spend as he chose.

Harry Margolis founded Margolis & Bloom LLP, a six-lawyer Boston law firm in 1987. He has been a designated “Super Lawyer” since 2005 and is Founder and President of ElderLawAnswers that supports seniors, their families and their attorneys by providing various online tools and resources.

One of my clients, who I will call Marilyn, was not unusual in her fear that she might become disabled one day. Her attitude, which she expressed to her three children, was that if she ever needed nursing home care her family should “take me out to the backyard and shoot me.” Not able to contemplate a middle course, she did no advance planning for the possibility that she would need care in the future. Her failure to think ahead proved fateful for her family and points to the necessity of thoughtful planning.

Marilyn was lonely in the house in which she had raised her children (her husband having passed away years before). She and her younger daughter, Nancy, agreed that Marilyn should move in with Nancy's family, and together they purchased a new house with an in-law apartment.

After the move, unfortunately, Marilyn became ill, and she has needed increasing levels of assistance ever since. Nancy gave up her part-time job to care for her mother, and the situation has put great strain on the entire family.

It also has given rise to discord between Nancy and her brother and sister. Nancy and her husband felt that they should be compensated for their sacrifice. The brother and sister appreciated what Nancy and her family were doing for their mother, but they believed that the bigger house that Marilyn helped them purchase was adequate compensation.

Unfortunately, the arguments over what Nancy and her husband should be paid and the most appropriate care for Marilyn split the family in two.

Could this have been avoided? Perhaps.

Marilyn could have planned ahead and included all of her children in the planning process. Even after it became clear that Marilyn needed help, her family might have been able to come together on a plan of care for her if they had talked openly.

All too often, these misunderstandings occur due to family members having different and incomplete information. Frequently, some family members feel overburdened, afraid to ask for help, or don’t know what they can expect from siblings and other relatives. Families often can avoid these results by taking the following steps:
 
•    Meet while everyone is healthy to plan ahead and get proper estate and financial planning in place.
•    If a crisis occurs, meet to share information and expectations and to divvy up responsibilities.
•    Prior to the meeting, everyone should compile a list of what they want to learn and what issues they would like to cover.
•    Prepare an agenda in advance.
•    Meet in-person if possible. If not, use conference calling or video solutions.
•    Use a facilitator, usually a geriatric care manager or an elder law attorney, although it’s possible that family friends or clergy can serve this role.
•    Write down and share any decisions that come from the meeting.
•    Hold as many meetings as necessary.

By taking these steps, many misunderstandings can be avoided and no single family member needs to feel entirely alone and overwhelmed. Whether it’s a question of moving in with a child, moving to a retirement community, or simply deciding who will handle financial and health care decisions upon the parent’s illness or incapacity, an open discussion can avoid misunderstandings and bruised feelings. It certainly would have helped if Marilyn’s family had taken these steps before Nancy stepped into the breach to take care of her mom.

Harry Margolis founded Margolis & Bloom LLP, a six-lawyer Boston law firm in 1987. He has been a designated “Super Lawyer” since 2005 and is Founder and President of ElderLawAnswers that supports seniors, their families and their attorneys by providing various online tools and resources.