According to the Alzheimer's Association, dementia “is a general term for a decline in a person’s mental ability which is severe enough to interfere with daily life.” Dementia is not a specific disease, but rather refers to a wide range of memory decline or thinking skills which impacts daily life. Millions of Americans have some form of dementia, and millions of more Americans will develop some form of dementia as our population continues to age. Different types of dementia may progress at different paces, which makes it important to consider the topic of estate planning fairly quickly for persons prone to or in the early stages of dementia. Being diagnosed with dementia or having a loved one diagnosed with dementia can be a scary, confusing time. Families dealing with dementia often have many questions. If you or a loved one are dealing dementia, perhaps you have considered the questions below. Or, if you have not, the questions below may give you some food for thought as you begin to approach the topic of estate planning in the context of dementia.
1. I am concerned I may develop dementia based on my family history. When should I start to think about estate planning?
If dementia is a concern for you, the time to plan is now. Watching a loved one or family member struggle with dementia can be a significant factor in driving individuals to prepare estate plans. Most people caring for loved ones with dementia want to make sure that future generations do not have to deal with the pressure of preserving and protecting assets on top of struggling with the grief and/or emotional turmoil of watching a family member battle dementia. Planning early will ensure that your wishes are clearly laid out, and that you have adequate plans in place to alleviate stress on future generations.
2. My doctor has told me I have dementia. Is it too late to create an estate plan?
Often times, dementia is progressive, and individuals in the early stages of most forms of dementia still have the ability to make important decisions. Receiving a “diagnosis” of dementia does not necessarily mean that it is too late to create an estate plan. However, it is important to act quickly to make sure that you have sufficient time to outline your wishes and create an estate plan to provide for your needs. The sooner the estate planning process is completed, it is more likely that you will be able to exercise the control you would like over your estate plan, and more planning options and techniques will generally be available to you. Once dementia progresses to the point where you are no longer able to understand the nature and effect of creating an estate plan, it will be too late to preserve your wishes and desires. However, until that point, you are able to, and should, implement an estate plan. Depending on the type of dementia and its stage of progression, it may make sense to have a medical opinion outlining the ability to make estate planning decisions.
3. How does a person get appointed to act for me when my dementia progresses to the point I am no longer able to act for myself?
If you have prepared an estate plan, the terms of the estate plan will outline how someone takes over for you. Most times, this transition can happen without probate court involvement.
If you have not prepared an estate plan, it is likely that a family member or other interested person will seek to have a Guardian and/or Conservator appointed by the probate court to act on your behalf. In Michigan, Guardians are appointed for incapacitated persons to make decisions on the living arrangements, medical care, among other things, for the incapacitated person. Conservators are appointed to act as the financial and legal representatives of incapacitated persons. Both Guardians and Conservators are appointed by the probate court and both have ongoing reporting requirements to both the court and the family members or other persons interested in the well-being of the incapacitated person.
4. If I am concerned about dementia, what are the advantages of using a trust?
The use of a trust may make sense for individuals facing dementia. However, as with all trusts, it is important to properly transfer all assets to the trust to avoid the necessity of probate, both during lifetime and at death. Your trust will likely contain a detailed plan for determining your incapacity and a detailed plan for use of the trust’s assets for your benefit during incapacity. Trusts maintain privacy and allow for greater flexibility in planning. If you are considering the use of a trust, you should seek both legal and tax advice to make sure your objectives are being met.
5. I don’t have long-term care insurance. How do I protect and preserve assets in light of increasing cost for long-term medical care?
Planning to receive Medicaid benefits can be a difficult task. Medicaid eligibility follows strict guidelines, both in terms of the amount of assets you own and the amount of income you receive. Additionally, if you receive Medicaid benefits, the State of Michigan can attempt to recover for benefits paid on your behalf through the Medicaid estate recovery program. If you are likely to need Medicaid benefits in order to provide for your long-term care, you should seek legal advice to learn more about the qualification and reporting requirements associated with these benefits.
6. I own a business with other individuals. How will dementia affect my ownership of the business?
Often, bylaws or operating agreements associated with a business outline how the business owners’ interests will be passed upon death or disability. Business owners should carefully review these provisions to ensure that they are fair and understood by all other owners. In the event changes need to be made, it is important to make those changes as soon as possible.
Absent a provision in the business’ governing documents, the business interest may end up being managed by a person appointed under a Durable Power of Attorney or by a court-appointed Conservator, as the case may be. Often times, the remaining business owners are not comfortable with having a “new partner,” which can cause tension. Therefore, it is vitally important for the business documents to properly outline the agreements of the business owners.
Original source: http://www.shrr.com/estate-planning-and-dementia-answers-to-common-questions