Newly published article - Younger-Onset Alzheimer's Disease: Legal and Financial Issues

posted October 12, 2012

Donald N. Freedman


The onset of Alzheimer’s disease prior to age 65 raises intensely painful personal and family issues for the individual, his or her family, friends, employer and others involved in his or her life. Diagnosis also raises special legal and financial concerns, and these are the focus of this paper. In many respects, the issues are different from those affecting older persons with Alzheimer’s. The younger individual is more likely to be working at the time of onset and will need to decide on continuing or terminating work, and on how best to access any work-related disability insurance benefits and COBRA for temporary continuation of health insurance. He or she is more likely to have a working spouse, whose income will affect eligibility for some programs. He may have minor or dependent children. She may well have retirement accounts, but be too young to access them without the penalty that usually attaches. Eligibility for some government programs is limited to people who have reached age 50, 55, 62 or 65. Also, income and asset tests for benefit programs vary for people of different ages. The purpose of this paper is to highlight and at least begin to explore some of the more important of these special issues and concerns in relation to people with Alzheimer’s Disease under age 65.

1. Give priority attention at the earliest possible time to protective steps needed to provide for substitute decision-making upon later incapacity.

a. What instruments?

i. Durable power of attorney, for legal and financial decisions.
ii. Health Care Proxy, for medical decisions once the individual is no longer able to make them on his own.
iii. Medical Directive or “Living Will” to express preferences about care at end-of-life.
iv. “HIPAA” releases, to give persons you wish access to otherwise private medical information, even prior to incapacity.

b. Capacity to execute?

i. Do I understand the general purpose and use of the instrument?

ii. Do I have the capacity to appreciate my relationship with the persons being named as:
(1) Attorney-in-fact and alternate/successors?
(2) Health care agent and alternate/successors?
(3) Person with authority access to private medical information?

2. If signs and symptoms have reached to the point of raising concern in the individual or family, it may be too late to apply for long-term care insurance, but the possibility may be worth exploring. Chances of approval, or approval at preferred rates, are best if application is made before any genetic testing or other testing pertaining to memory loss.

3. Having a Durable Power of Attorney and Health Care Proxy makes guardianship unnecessary in most cases. However, if the individual lacks the capacity to execute a durable power of attorney or health care proxy, a court-appointed guardian (for personal and medical decision-making), conservator (for financial decision-making), or both, may be needed.

a. Guardian (to protect health and other personal interests)

i. A guardian may be appointed for a person who is “incapacitated,” that is, a person “who for reasons other than advanced age or minority has a clinically diagnosed condition that results in an inability to receive and evaluate information or make or communicate decisions to such an extent that the individual lacks the ability to meet essential requirements for physical health, safety or self-care, even with appropriate technological assistance.”

ii. A guardian’s authority should be tailored to address the individual’s specific needs. The guardian may be appointed on an open-ended basis or for a temporary period; with authority extending to virtually all areas of decision-making (as an unlimited or “plenary” guardian) or with authority limited to particular areas of need (as a “limited” guardian). The principle of “the least restrictive alternative” applies. This means that the guardian’s authority should be no broader than necessary to protect the individual’s key interests.

b. Conservator (to protect financial interests)

i. A conservator may be appointed “if the person is unable to manage property and business affairs effectively because of a clinically diagnosed impairment in the ability to receive and evaluate information or make or communicate decisions, even with the use of appropriate technological assistance; and the person has property that will be wasted or dissipated unless management is provided or money is needed for the support, care and welfare of the person or those entitled to the person’s support and protection is necessary or desirable to obtain or provide money.”

ii. Like guardians, conservators may be appointed on an open-ended or temporary basis, with full or limited authority.

c. If the person requires assistance with a particular decision (for example, transferring title of the residence to his spouse, or sale of a house), the court may use a simplified procedure to issue “protective orders” instead of the full conservatorship process.

4. If the individual is working at the time of onset, he will have to face many decisions about continuing and eventually terminating his work.

a. About continuing to work:

i. Americans with Disabilities Act (right to reasonable accommodations for people still able to meet the requirements of their jobs).

ii. Potential eligibility for MassHealth under the CommonHealth program for disabled adults working at least 40 hours per month; eligibility may be subject to a monthly premium but is not subject to an income or asset cap.

iii. Family and Medical Leave Act (right to short-term un-paid leave with right of return)

b. About stopping work:

i. Wage continuation
ii. Severance
iii. Unemployment Compensation
iv. Short-term disability insurance
v. Long-term disability insurance
vi. Long-term care insurance
vii. Group health insurance continuation

(1) Cobra/MA “Mini-Cobra” temporary continuation of employer group coverage for worker, spouse and dependent children for 18 months (plus 11 months with disability as determined by Social Security) at group rates but without prior employer subsidy. (For disability extension, employer may charge up to 150% premium cost.)
(a) Federal law as to employers of 20+ workers
(b) MA State “Mini-Cobra” as to employers of 2-19 workers
(c) Note that enrollment in Medicare is a qualifying event as to spouse and dependent children
(d) Be careful with the technical notice and election requirements

(2) Obtain coverage through policy of the spouse

(3) Conversion to individual policy

(4) Massachusetts Health Connector
(a) Commonwealth Choice - marketplace
(b) Commonwealth Care - subsidized
(c) Watch open enrollment periods (although usually waived if employment-related insurance is lost due to termination or voluntary quit.)

5. Accessing IRA’s, 401k’s and other retirement accounts

a. Taxable at any age. No exceptions.

b. Penalty prior to age 59 ½, unless an exception applies:

i. If you are disabled

ii. if you or your spouse is unemployed at least 12 weeks and the withdrawal is needed to pay for health insurance for you or your immediate family

iii. If the withdrawal is needed to pay for unreimbursed medical expenses in excess of 7.5% adjusted gross income

iv. To pay for certain education expenses

v. Even if other exceptions do not apply, if paid in substantially equal periodic amounts based on life expectancy

6. Accessing home equity

a. Refinance first mortgage

b. Home equity line of credit (HELOC)

c. Second mortgage/home equity loan

d. Loan

e. Reverse mortgage (but evaluate this option with particular care as risks, limitations and expenses are involved)

7. Using available LTC insurance

a. Do I meet medical qualification for benefits, often expressed in terms of need for assistance with a specified number of activities of daily living (?

b. If I qualify for benefits, should I start claiming as soon as I have a need for services, or should I wait?

i. Usually -- when first available, to support the individual at home as long as possible and to conserve family resources.

ii. To protect the LTC insurance exemption from estate recovery against the residence under MassHealth, generally forego claims for home-and-community based services that would reduce available benefits for nursing home placement beyond the required minimum on admission: 730 days at $125/day.

c. Provider qualification for payment or reimbursement

i. Often technical under terms of policy.

ii. Verify with the insurer that the provider qualifies for payment or reimbursement before you make your selection.

8. Privately arranged home care

a. Many people arrange for home care services through private “home care” agencies. Of course reputation for quality must be foremost in your selection, but also understand that home care agencies may be organized in fundamentally different ways, with very different legal and financial implications for you.

i. In some, the home care workers are directly employed and supervised by the agency. Such agencies are usually certified Medicare and MassHealth providers. In such cases, the agency must:
(1) withhold and pay federal and state income taxes.
(2) withhold and pay the employee’s portion (4.2%) of Social Security taxes and also the Medicare tax (1.5%).
(3) pay the employer’s portion of Social Security taxes.
(4) pay federal and state unemployment taxes.
(5) provide worker’s compensation insurance.

ii. With other agencies, workers are not employed by the agency but only placed by it.
(1) Such agencies are usually NOT certified Medicare and/or MassHealth providers, but instead are required only to be licensed as employment agencies by the state Executive Office of Labor & Workforce Development. Licensing primarily involves protection of workers from exploitation by the agency itself. From the fact of a current license you can infer nothing about the quality of the program, standards in the selection of workers, or the nature and extent of any on-going training and supervision.
(2) While workers of such agencies may consider and describe themselves to be self-employed independent contractors, it is YOU and not either the agency or worker who may be the “employer” for most legal purposes.
(3) If the worker is not employed directly by the agency, but merely placed with you by the agency, or if you hire a worker privately without the involvement of an agency, then what happens? The law says that if you have the right to control the details of the work and have paid the worker more than $1,800 (for 2012) in any calendar year then you are the employer, as a matter of law.
(4) Home workers, including home health aides, personal care attendants, certified nursing assistants, practical nurses, and the like, are defined as household employees by law. Your characterization of them, or their characterization of themselves, as “independent contractors” or as “self-employed” does not change this result. Whether they work full-time or part-time for you also makes no difference. (Registered nurses, physical therapists, social workers and other like professionals can ordinarily be paid as independent contractors, because you do not have the right to control the details of their work.)
(5) If the home worker is technically an employee but you pay him without meeting the obligations of an employer as listed above, including worker’s compensation insurance, then:
(a) You may be liable to the IRS and state Department of Revenue for the taxes that should have been withheld, plus interest and penalties, if the worker does not himself pay his taxes.
(b) You may be personally liable for damages if the worker is injured on the job (e.g., back injury while providing physical assistance) since homeowner’s insurance may not cover homeworkers.

b. Private arrangements
Families often consider care arrangements with individual care providers rather contract for services from an agency, on the basis of cost considerations or personal reference. However, understand the tax requirements for household workers and your financial exposure if the worker is hurt on the job. The same requirements apply to such private arrangements as apply to workers not employed by but only placed by an agency. See the discussion immediately above at section 8.a.ii.

9. Explore all avenues of governmental services and benefits

a. Social Security Disability Insurance Benefits

i. Eligibility
(1) Be Age 18 - 65
(2) Have “insured status” which is basically ten years in “covered employment” (paying FICA as employee or self-employed). The most commonly encountered workers who are not covered are employees of many state and local governments, who instead may (or may not) be eligible for benefits under other state and local governmental programs.
(3) Onset of disability within five years of end of work.
(4) Meets disability criteria: “Unable to engage in any substantial gainful activity by reason of a severe physical or mental impairment or combination of impairments which has lasted or is expected to last for more than twelve consecutive months”

ii. Application process
(1) When to apply? Usually ASAP after onset of disability, in light of 5-month waiting period, 24-month wait for Medicare and limitation to twelve months for retroactive coverage. Remember that onset of disability usually means when you stop work, not the earlier date when you may have received your diagnosis.
(2) How to apply?
(a) Office appointment to make application or apply on-line.
(b) Complete Disability Report. Can also be done on-line.
(c) “Compassionate allowance” initiative. Diagnosis of “early-onset Alzheimer’s” results in expedited medical evaluation although not assured favorable decision. (Note the use of “early-onset” terminology in contrast to the generally preferred “younger-onset” terminology. IN THE SOCIAL SECURITY CONTEXT, BE SURE TO USE THE “EARLY-ONSET” TERMINOLOGY.)

iii. Benefits
(1) Monthly cash benefits:
(a) Workers’ disability insurance benefits. Level of benefits depends on lifetime earnings record. The current average monthly benefit for the disabled worker is $1,111. The maximum benefit is about $2,513.
(b) Spouse’s benefits (based on the worker’s earnings record), if the spouse is EITHER:
(i) Age 62 or older; or
(ii) Any age if caring for your child who is under age 16 or disabled and entitled to disability benefits on the worker’s record.
(c) Child’s benefits for each of your children who is:
(i) Unmarried.
(ii) Younger than 18 OR age 18 or 19 but still in high school as full-time students OR 18 and older and severely disabled (the disability having started before age 22).
(d) Each family member entitled to spouse’s or child’s benefits may be eligible for a monthly benefit up to half the worker’s disability benefit amount. However, spouses taking benefits prior to their own regular retirement age (age 66 for persons born between 1943 and 1954, for example) receive reduced benefits. Also, a limit of between 150% and 180% of the worker’s benefit generally applies to the total benefits payable to a family.
(e) If the spouse is eligible for retirement benefits based on his or her own work record as well, the impact of age of retirement on benefits is complex. Best to sit down with someone in your Social Security District Office.

b. Medicare

i. Eligibility after the earlier of (1) 24 months of cash benefits under Social Security Disability Insurance or (2) reaching age 65, whichever comes first.

ii. With Medicare, you are also eligible to purchase supplemental “Medigap” insurance, such as Medex Bronze.

iii. With Medicare, you are also eligible to purchase government-subsidized “Part D” insurance for prescription drugs.

c. Supplemental Security Income. Workers with very limited earnings histories, and other family members, especially children 18 or older, with very low income and very limited assets (basically under $2,000), may also be eligible for monthly cash benefits from Social Security under the Supplemental Security Income (SSI) program.

d. Veteran’s Administration special monthly pension: Aid and Attendance

i. Monetary support of up to $1,704 per month to a veteran, $1,094 per month to a surviving spouse, or $2,020 per month to a couple for certain veterans and surviving spouses who cannot function completely on their own and require the regular attendance of another person to assist in eating, cooking, bathing, dressing, leaving home, etc. Also potentially qualifying are individuals who are blind, patients in a nursing home because of mental or physical incapacity, and residents in assisted living facilities who require assistance on a regular basis to protect themselves from daily environmental hazards. Often overlooked is the potential eligibility of a healthy veteran caring for a sick spouse, who may qualify for up to $1,338 per month.

ii. A Veteran under 65 must be disabled and ordinarily must have had at least 90 days of active military service, with at least one day during a period of war.

iii. Eligibility is limited to Veterans who lack “sufficient means” to provide for their own care. The VA applies asset and income measures depending on age and other circumstances.
(1) $80,000 in assets (aside from the residence) is a commonly understood measure of sufficient means. Note: transfers of assets to establish eligibility are currently not disqualifying for VA services. HOWEVER, BEWARE OF POTENTIAL IMPACT ON MASSHEALTH ELIGIBILITY.
(2) Income limits (2012): $20,447 for a single veteran, $24,239 for a veteran with a spouse or dependent, $13,138 for a surviving spouse, and $15,672 for a surviving spouse with a dependent, after deducting all allowable medical related expenses for themselves and their spouses (including the cost of skilled nursing, assisted living, home health care, Medicare or other insurance premiums).

e. MassHealth Standard

i. Referred to generally as Medicaid, this is a state-administered, federally regulated program under which states receive Federal financial assistance in providing certain health and rehabilitation related services to people meeting certain personal and financial requirements. Eligibility and services vary depending on age, marital status, the make-up of the household, and the kind of service required.

ii. Services
(1) Comprehensive medical, hospital, rehabilitation, mental health services.
(2) Home health care.
(3) Personal care attendant services.
(4) Adult day health.
(5) Group adult foster care (assisted living).
(6) Family care.
(7) PACE (Program of All-Inclusive Care for the Elderly) and ESP (Elder Service Plan) programs for people 55 and older.

iii. Eligibility
(1) Depends generally on:
(a) Family circumstances (whether unmarried, married living together, married living apart (for reasons other than health care)
(b) Age (whether at least 55, 60, or 65+ depending on the specific MassHealth program)
(c) Level of need for care
(d) Financial circumstances
(2) Eligibility in common younger-onset circumstances:
(a) Married couple at home, under age 60, with Alzheimer’s Disease not yet necessitating special services:
(i) No asset limit on eligibility.
(ii) Annual income limit of $19,560 for both. (No deductible available.) HOWEVER, SEE DISCUSSION OF COMMONHEALTH, BELOW.
(b) Married couple at home, with Alzheimer’s Disease now more advanced, and ill spouse is age 60 or older.
(i) If medical condition is such that the ill spouse “would need nursing home services were it not for certain services” at home, may qualify for services under the Frail Elder Home and Community-Based Services Waiver.
1. Ill spouse may have no more than $2,000 in own name; however, assets are transferrable to well spouse, without limit or penalty.
2. Income of well spouse is disregarded.
3. Income of ill spouse is limited to $32,670.
(c) Married couple with ill spouse in a nursing home.
(i) Assets
1. Assets of spouses are counted together, regardless of ownership (result generally NOT affected by a prenuptial agreement)
2. Community spouse is generally entitled to a resource allowance (in 2012) of $113,640 (but may be higher in special circumstances)
(ii) Income of the community spouse – DISREGARDED. NO EFFECT ON ELIGIBILITY.
(iii) Treatment of income of the institutionalized spouse:
1. Deduction allowed of up to $2,841 (or more in special circumstances or with a court order) for the support of a low-income community spouse, as a Minimum Monthly Maintenance Needs Allowance.
2. Dependents’ allowances for minor or dependent disabled children.
3. Health insurance deduction.
4. Personal needs allowance of $72.80.
5. Balance paid to the nursing home as “patient pay amount.”

f. CommonHealth

i. A state program that provides services similar to MassHealth Standard for, among other groups, non-working disabled adults under age 65 who are ineligible for MassHealth Standard because their income is too high. As particularly appropriate for many people with younger-onset Alzheimer’s Disease, services include:
(1) home health care.
(2) personal care and private duty nurse services.
(3) rehabilitation and therapy services (physical, occupational, speech).
(4) mental health services.
(5) hospice services.
(6) medical equipment and supplies.
(7) adult foster care (also called adult family care).
(8) adult day health care.

ii. Eligibility
(1) Annual FAMILY income not over 133% Federal Poverty Guidelines (FPG) that vary with family/household size. For 2012, these limits are, for example, $20,123 for a couple; $25,390 for a family of three; and $30,657 for a family of four) OR
(2) Annual FAMILY income over 133% FPG but who can meet a one-time-only six-month family deductible based on medical, dental, remedial, home care, personal care and certain other medical and non-medical expenses not covered by insurance (but including the cost of Medicare and health insurance itself). The deductible amount depends on family income and family size. For example, the one-time deductible amount for a family of four with family income of $40,000 would be $14,534 over a six-month period.
(3) The six-month period for the deductible starts ten calendar days before MassHealth Central Processing Unit receives the MassHealth application (called a MassHealth Benefit Request or MBR), and ends six months later.
(4) Bills must be for services already received.
(5) Bills used to meet the deductible may include the following:
(a) Bills paid during the deductible period (other than by insurance), regardless of dates of service; and
(b) Unpaid bills received during the deductible period, regardless of dates of service.
(c) Bills used to meet the deductible may not be paid or be subject to payment or reimbursement by Medicare, the Veterans’ Administration, Workers’ Compensation or any other health insurance or coverage. Bills paid either by the individual or by another person on the individual’s behalf can be counted toward the deductible.

iii. Cost.
(1) CommonHealth members with family incomes above 150% of the Federal Poverty Guidelines have to pay monthly premiums based on a sliding fee scale, and depending on whether or not the individual also has Medicare or other health insurance. For example, the monthly premium for an individual in a family of four with total family income of $46,100 and no other insurance would be $40; family income of $92,200, a monthly premium of $202; family income of $138,300, a monthly premium of $404.
(2) Premiums are reduced if the individual is also eligible for Medicare or other health insurance, particularly in lower income ranges.
g. Massachusetts Home Care Program
i. Provides support services to elders with daily living needs to help maintain independent community living, and also support and respite services in caregivers.
ii. Services include largely non-medical services such as homemaker, personal care, day care, home delivered meals, chore and transportation; and respite services for care-givers.
iii. Coordinates with MassHealth and other programs.
iv. Administered by the Executive office of Elder Affairs in coordination with local private non-profit Aging Services Access Point agencies (ASAPs), such as Springwell.
v. Eligibility is based on age (60 years or older or under 60 with a diagnosis of Alzheimer’s disease and a need for respite services), financial status, and extent of need for assistance in carrying out out basic activities of daily living such as personal hygiene and grooming, dressing and undressing, self-feeding, functional transfers (getting into and out of bed or wheelchair, getting onto or off toilet, etc.), bladder and bowel management and ambulation.

10. What’s the story about “Medicaid planning”?

a. Use of various strategies to facilitate an earlier eligibility than spend-down alone or to insulate assets, particularly the residence, from “estate recovery” (the right of the state to seek reimbursement, after the member’s death, for Medicaid benefits properly paid).

b. Strategies

i. Transfers, but disqualifying if not within an exception applicable to:
(1) Spouse.
(2) Minor child .
(3) Disabled child.
(4) A “care-providing child” (a child of the individual living in the home and providing care essential to maintaining the individual in the community for at least two years immediately preceding nursing home placement.
(5) A sibling living and having an ownership interest in the residence.

ii. Trusts
(1) Testamentary (that is, trust provisions contained in a Will; used in this context primarily for the benefit of the spouse).
(2) Irrevocable Income-Only Trusts .
(3) Third party Qualified Special Needs Trust (for the benefit of the individual’s disabled child).
(4) First party (“self-funded”) Qualified Special Needs Trust.

iii. Changes in title, for example, tenant-in-common to joint or individual.

iv. Changes in kind of financial institution, for example, bank to non-bank.

v. Life estate.

vi. Immediate annuities meeting specific requirements of the MassHealth regulations.

c. Concerns

i. Loss of control, autonomy.

ii. Risk of failure of strategy due a change in the law.

iii. Risk to transferred assets:
(1) Misappropriation or other malfeasance.
(2) Loss or diminishment in value of transferred assets due to negligence even well-intentioned investment decisions or negligence.
(3) Loss of access to transferred assets due to the death, disability, divorce, bankruptcy, long-term unemployment or other mishap to the child or other person or persons to whom the assets were transferred.

11. For all the specialness of planning in this context, don’t neglect general estate planning concerns that nonetheless remain pertinent and must be addressed.

a. Have your affairs in order for the protection of:

i. Spouse

ii. Children, especially children with special needs or who are otherwise dependent

b. Concerns about probate and minimizing costs of settling affairs

c. Tax concerns

i. Federal exemption -- $5 million for 2012 (so far); uncertain thereafter

ii. State filing threshold -- $1 million

d. Ordinary estate planning tools (in addition to durable powers of attorney and health care proxies, as discussed above):

i. Wills

ii. Trusts

iii. Beneficiary designations for life insurance, retirement accounts


Concluding Note

Individuals and families finding themselves suddenly and unexpectedly having to the deal with the impact of Alzheimer’s Disease or related disorders, especially when in the prime of life, are faced with challenges on so many levels. The issues involved in the legal and financial domains are complex and unfamiliar. Dealing with them in a comprehensive and ongoing way, starting as soon as possible after onset, is essential for the effective protection of the individual and family. To be effective, care planning must be coordinated with legal and financial planning. The case for a team approach to planning, centered on the needs of the individual and his family, could not be plainer.

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