Younger-Onset Alzheimer’s Disease: Key Legal and Financial Issues for the Aging Life Care Manager™
About the Author
Attorney Donald M. Freedman Esq. concentrates his practice in elder law, work and entitlement related legal problems of adults with disabilities, special estate planning for families with children with disabilities and other special needs, and advising trustees, guardians, and other fiduciaries on most appropriately meeting their responsibilities.
He has argued important elder and disability law cases before the Massachusetts Supreme Judicial Court, the Federal District Court for the District of Massachusetts, and the Court of Appeals for the First Circuit.
In January 2009, Attorney Freedman was chosen by Massachusetts Continuing Legal Education, Inc. to be one of four recipients of its Scholar-Mentor Award for “outstanding contributions to legal education” over the past twenty-five years. He has been named one of “America’s Best Lawyers” in the field of elder law as published in the Boston Globe magazine, annually 2008 – 2016. As published in Boston Magazine, he has been named a Massachusetts “Super Lawyer” in elder law, estate planning, probate, and health care annually for the years 2004 – 2015, and in 2006 and 2007 was listed in the “top 100 Massachusetts Super Lawyers” in any field. He has also been selected as a “top rated lawyer in trusts and estates” by reason of his longstanding “AV” preeminent rating from Martindale-Hubbell.
A 1969 graduate of Brandeis University, Attorney Freedman obtained his law degree from Boston College Law School in 1972, and has done graduate coursework with the Boston University School of Law Graduate Tax Program.
Donald M. Freedman, Esq.
While Alzheimer’s disease (AD) is primarily a disease of old age, for about 5%, or about 200,000 people in the US, the disease has an onset prior to age 65, and includes people in their 40’s and 50’s and sometimes even younger. Young-onset Alzheimer’s disease is defined by the Alzheimer’s Association as Alzheimer’s disease arising prior to age 65. For care planning purposes, however, age 65 should be seen more as a red flag than a bright-line criterion. While the clinical presentation of early stage disease may be similar regardless of age of onset, the family, work, legal, and financial context of the disease may be very different in the younger cohort. People affected by this disease may well be working, and are likely in mid-career. They may well still have dependent children, and may have caregiver responsibilities for aging parents.
While the need for personal care and other support services may be demonstrated within the young-onset population, eligibility for government care assistance is often limited to people who have reached age 50, 55, 59½, 62, 65 or “normal retirement age” (between 66 and 67 depending on year of birth).
For long-term disability insurance benefits, age 65 may signify the end of benefits, or a significant reduction in benefit levels. Tax considerations in planning for care can be very important in stretching family resources, and in this context as well, age plays a significant, although often seemingly arbitrary role. For example, ages 55, 59½, 65 and 70½, among others, signal either the availability or loss of potentially advantageous tax rules.
While this article focuses on what is special in care planning for the younger cohort, we must not lose sight of key protective strategies that are important regardless of age of onset. Key among these are durable powers of attorney, health care proxies, and wills.
Important Advanced Planning Considerations
Given the foreseeability of a progressive loss of capacity to make decisions about legal, financial, medical and other matters, the Aging Life Care Manager should give priority attention at the earliest possible time to counselling protective steps needed to provide for substitute decision-making upon later incapacity. Pertinent instruments include a durable power of attorney, for legal and financial decisions; a health care proxy, for medical decisions once the individual is no longer able to make them on his own; a medical directive or “living will” to express preferences about care at end-of-life; and “HIPAA” medical information releases, to give persons you wish access to otherwise private medical information, even prior to incapacity.
In the presence of a diagnosis of dementia, one should appropriately ask whether the individual has the capacity to execute such an instrument. While legal standards vary among the states, and while some cases may warrant formal assessment, it is certainly the case that many people with dementia that has progressed enough to interfere with work and life activities may nonetheless still have the capacity to execute such documents. A diagnosis should not in itself be considered determinative. Generally, an individual has the capacity to sign if able to understand the general purpose and use of the instrument and to appreciate his relationship with the persons named.
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.
Employment Issues and Income Protection
If the individual is working at the time of onset, counseling must be directed to helping the individual think through continuing or terminating work on appropriate terms. Aside from personal preferences about work and concerns about lost income, the individual must be helped to consider the nature and extent of risk to himself, his employer, his co-workers, and those served by the work.
If the individual remains otherwise able to work, the Americans with Disabilities Act (ADA) and many state laws require most employers to make reasonable accommodations to the known physical or mental limitations of otherwise qualified individuals.
The Family and Medical Leave Act (FMLA) is a federal law requiring most employers to provide unpaid, but job-protected, leave for employees to deal with a serious medical problem of their own or of a spouse or parent. The Act allows eligible employees to take up to 12 work weeks of unpaid leave (continuous or intermittent) during any 12-month period. Covered employees are also entitled to continuation of the same group health insurance benefits, including employer contributions to premiums that would exist if the employee were not on leave.
Concern about loss of income is, of course, a crucial consideration in deciding whether and when to stop work. Therefore, consideration must be given to alternative vehicles to provide at least a measure of income maintenance.
If the individual is unable to perform the duties of his current position, he may be entitled to short-term disability insurance benefits as an employment fringe benefit or under an individual insurance contract. Stricter standards typically apply to long-term disability benefits. If the individual is terminated from his job or forced to resign because he is no longer able to perform required duties, he may nonetheless be eligible for state unemployment compensation benefits if he remains ready, able, and willing to work elsewhere in some other capacity.
If the individual is no longer able to engage in any significant productive work activity, the individual may consider applying for Social Security Disability benefits. To be eligible, the individual must meet certain “insured status” as well as “severe impairment” tests. In most cases pertinent to this topic, insured status requires that the individual have at least 40 quarters of coverage under Social Security by having worked in “covered employment” and having paid FICA as an employee or self-employed person. The worker must also have earned at least 20 quarters of coverage during the 40 quarters immediately preceding the onset of disability. (The most commonly encountered workers who are not covered are employees of many state and local governments. These employees may (or may not) be eligible for benefits under other state and local governmental programs.) To meet the “severe impairment” criteria, the worker must be “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 12 consecutive months.”
Ordinarily, a person should consider applying as soon as possible after onset of disability, in light of the required five-month waiting period for benefits after onset, the 24-month wait for Medicare and the limitation to 12 months of retroactive coverage. It is important to note that the onset of disability usually means when you actually stop work due to your condition, and not the earlier date when you may have received your diagnosis, or the later date at which your compensation stops; for example, if you are receiving continuing pay for accumulated vacation time or under a severance agreement.
Note that diagnosis of “young-onset Alzheimer’s” results in an expedited medical evaluation as the result of Social Security’s “Compassionate Allowance” initiative relating to certain medical conditions generally found to be disabling.
Monthly cash benefits are payable to the worker and also to the spouse age 62 or older, or of any age if providing care to a minor or disabled child. Lastly, they are payable to a child of the worker who is unmarried, 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).
An often underutilized cash benefit is the Veteran’s Administration special monthly pension: Aid and Attendance. Monetary support of up to $1,788 per month to a veteran, $1,196 per month to a surviving spouse, or $2,120 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 $1,406 per month.
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. 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. $80,000 in assets (aside from the residence) is a commonly understood measure of sufficient means.
Health Insurance, Income and Asset Protection
Concern about the loss of health insurance is often a critical factor in deciding how and when to stop work. In some cases, it may be possible for the individual to insure under a spouse’s employment plan. Where such coverage is not available, Federal “COBRA” law provides for the temporary continuation of employer group coverage lost due to separation or reduction of hours, for the disabled worker, spouse, and dependent children for up to 29 months. Many states expand coverage to smaller employers. Coverage is expensive, as the employer need not subsidize the group rate, and can under certain circumstances even charge a premium. Nonetheless, COBRA may be critical in providing continuing health insurance coverage given the uncertain future of the Affordable Care Act.
Medicare is available to the individual in younger-onset cases only where the individual has been awarded Social Security Disability benefits and has been entitled to benefits for at least 24 months. The individual’s spouse, whether or not she has worked and paid Medicare taxes, will not be eligible for Medicare until age 65. Medicare provides no coverage for children except in the case of an unmarried child with a severe disability arising prior to age 22. In any case, Medicare is geared and limited to acute care rather than to the long-term services and supports that are typically the focus of care-planning in the younger-onset context.
Medicaid is the state-administered, federally regulated program under which states receive federal financial assistance for providing certain health and rehabilitation related services, including long-term services and supports, to people meeting certain personal and financial requirements. Long-term services and supports include assistance with activities of daily living (such as eating, bathing, and dressing) and instrumental activities of daily living (such as preparing meals, managing medication, and housekeeping). Also funded by Medicaid is nursing facility care, adult daycare, home health aide services, personal care services, transportation, and supported employment, as well as assistance provided by a family caregiver, together with care planning and care coordination services.
Eligibility and services vary depending on age, marital status, composition of the household, and the kind of service required. While all fifty states participate in Medicaid in some manner, the extent to which states choose to provide optional services or to participate in many waiver programs differs widely, as does eligibility criteria. Given the stated intention of the current administration to revamp the program, endeavoring to provide specific guidance here would be problematical. That said, we may at least point out certain aspects of Medicaid law that have historically been fruitful for planning.
The transfer of assets as a strategy to facilitate Medicaid eligibility has generally been discouraged by the law over the years, through longer look-back periods (now five years) and more punitive formulas for determining the duration of transfer penalties. However, exceptions that have persisted over the decades reflect countervailing policies that the government has also found to be important, despite a liberalizing effect on eligibility. Since 1985, the law has sanctioned a number of strategies to protect a spouse at home from impoverishment where the other is institutionalized. This policy mandate finds manifestation in rules allowing transfer of assets to the community spouse; the deduction from the income of the institutionalized spouse to support a minimum maintenance needs allowance for the community spouse; in provisions allowing the set-aside of marital assets for the support of the community spouse; and an exception to generally restrictive trust provisions carving out an exception for trusts for the surviving spouse established and funded by a will. Also over this time, the law has authorized certain transfers to or in trust for the benefit of minor and disabled children. In identifying at least these vulnerable populations – spouses separated by institutionalization and the minor or disabled children of parents requiring long-term care – public policy has reflected important concerns beyond cost containment that, it is hoped, may continue to be a focus in some form in future iterations of the Medicaid program.
The income position of couples in the younger-onset circumstance is undercut by the loss of employment income to both the individual with the condition as well as the spouse who is now at least partially committed to caregiving. At the same time, while care expenses are expanding, there is no abatement in other budgetary demands, particularly in the presence of minor or dependent children. With the bulk of family resources typically locked up in retirement accounts and the equity value of the residence, how are such resources to be accessed?
Funds withdrawn funds from IRA’s, 401k’s, and other retirement accounts are taxable, regardless of age at the time of withdrawal. However, the extent of the impact can be moderated at least to a degree by planning withdrawals in conjunction with medical and care expenses, which can partially offset one another.
Funds withdrawn from an IRA prior to age 59½, and funds withdrawn from a 401k with a former employer prior to age 55, are subject to a penalty unless an exception applies. Exceptions most pertinent to this context involve withdrawals by an individual who is disabled; withdrawals to pay certain educational expenses; and withdrawals paid in substantially equal periodic amounts based on actuarial life expectancy.
To access home equity, consider financing or refinancing for a larger loan amount, either from a bank or, circumstances allowing, from a family member. Consider applying for a home equity line of credit, a second mortgage, or home equity loan, from a bank or family member. Consider applying for a reverse mortgage, although evaluate this option with particular care as special risks, limitations and high expenses are involved.
If the individual has long-term care insurance, counseling should be directed to determining whether the individual currently meets the medical qualifications for payment of benefits, often expressed in terms of need for assistance with a specified number of activities of daily living. Also, the question arises as to whether the claim should be made as soon as the need for services arises, or to defer the claim and conserve benefits for nursing home placement. We ordinarily recommend claiming as soon as you qualify. Many people underutilize benefits. However, many states provide a measure of protection from Medicaid estate recovery for the estates of individuals who have received Medicaid support and have had long-term care insurance meeting certain criteria. Families should be counseled to ensure that use of their insurance benefits, where applicable, is in accordance with these requirements.
Before arranging for services for which insurance reimbursement is expected, confirm with the insurer that the particular agency you have in mind qualifies under the policy.
Home Health Service Considerations
Many people arrange for home health services through private “home health” or “home care” agencies. Of course reputation for quality must be foremost among selection criteria, but home health agencies may be organized in fundamentally different ways, with very different legal and financial implications for the consumer. The most important legal distinction is between agencies that directly employ their workers, and a home care placement agency. In the former case, the agency withholds and pays state and federal income taxes, Social Security and Medicare taxes; pays federal and state unemployment taxes; and provides worker’s compensation insurance (to compensate the worker for injuries arising in the course of the employment).
In the latter case of workers placed by the agency, responsibility for taxes and insurance, and the family’s potential liability in the event of worker illness or injury, is a matter of federal and state tax law, employment, insurance, and personal injury law. As an Aging Life Care Manager, make certain that your client is fully informed of the legal and financial ramifications of the arrangements you are recommending, or at least as to what questions to ask.
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 and starting as soon as possible after onset, is essential for the effective protection of the individual and family. To be effective, care planning by an Aging Life Care Professional 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/her family, could not be plainer.