Articles - Law Offices of Christenson and Allex, LLC

by Attorney Iris M. Christenson
Published in Senior Lawyers Newsletter, April 2009

The Durable Power of Attorney (DPOA) deserves more attention and perhaps should be elevated to the same level of importance we reserve for a person's Will or Trust. This "minor" document can have a major impact since it might be the sole means of protecting your assets from long term care costs. If the document is tailored to your unique situation and conforms to the changes in the Medicaid regulations your estate planning goals can be achieved, even if you lack capacity to handle your financial affairs.

It's common to think of the DPOA as a means to name a trusted relative or friend to act as your agent in a few very basic financial matters, either temporarily or permanently. The agent is expected to handle tasks such as bill paying, depositing checks, transferring funds from one account to another, and perhaps, signing documents during a real estate transaction. The statutory DPOA form, found at §243.10, Wis. Stats., and other standard forms found online that meet the requirements of this same statute are adequate to accomplish this limited purpose. Understandably, the drafters of standard forms are concerned that powers such as the power to gift or change beneficiaries could become a license to steal (engage in self dealing), if a vulnerable adult appoints an unscrupulous agent. Those powers are specifically denied to an agent using these standard forms because such forms are often signed without the assistance of legal counsel.

Before you decide to use the standard form, consider retaining counsel to draft a DPOA that gives your agent the authority to "fix" many problems that may occur if you require expensive long term care. In the hands of the right person, a trustworthy friend or relative, or a reputable corporate entity, a well drafted DPOA which contains clear directives can be an extremely effective life planning tool. The following three (3) examples illustrate the usefulness of a well-drafted DPOA. Of course, this short list of examples is not meant to be a complete list of all of the provisions that could be included to protect your property and carry out your estate planning objectives.

The power to gift (with limitations).
The power to gift with limitations as to the recipient, the size of the gift, the timing of the gift and the purpose of the gift, can be a very useful tool to transfer assets to the trustee of a Special Needs Trust for a disabled relative, continue a pattern of gifting and even carry out a plan to transfer assets before applying for government benefits. The power to gift can be effectively tied to other estate planning documents in several ways. The recipients can be limited to the beneficiaries named in your Will (or Revocable Trust). The size of the gift can be limited to a specific amount or a proportionate share that matches the share the person would have received as an inheritance. The power to gift can even grant your agent the power to transfer assets to a Special Needs Trust. The Special Needs Trust may be described in your Will or it may have been established as a separate document. Your agent could be given the power to declare the Special Needs Trust irrevocable, if it had not yet been funded. Transfers to a Special Needs Trust could be a method of "spending down" that meets the principal's objectives and avoids divestment penalties.
The power to enter into a Caregiver Contract.
The ability to enter into a Caregiver Contract has become necessary since the implementation of the Deficit Reduction Act of 2005 (DRA 2005) in Wisconsin on January 1, 2009. Transfers to caregiver relatives, even small transfers, will be evaluated carefully to determine if such transfers are merely disguised gifts. The best and perhaps only method of assuring that such transfers will not be considered gifts and cause a lengthy penalty period (a period of ineligibility) is to use a Caregiver Contract. An agent with this power could assure that caregiver relatives are paid for the many hours of services they provide. If the caregiver is the agent, a provision could be included in the DPOA to require that an alternate agent pre-approve the Contract.
The power to execute and amend a Marital Property Agreement.
The power to execute or amend a Marital Property Agreement is useful AFTER a spouse is found eligible for Medical Assistance. Prior to eligibility, all assets, no matter how they are titled or classified by a Marital Agreement, are considered available resources. However, after eligibility has been determined, a community spouse may enter into or amend a Marital Property Agreement to reclassify assets as his/her individual property and exercise his/her power of appointment over the assets. If either the Medicaid Recipient or the Community Spouse does not have the capacity to amend a Marital Property Agreement or execute the new document, his/her agent could act on behalf of the spouse that lacks capacity. The Community Spouse (or his/her agent) could then create a Special Needs Trust for the institutionalized spouse and name the trustee of the Special Needs Trust as beneficiary of some or all assets and/or name others as the beneficiaries of the balance of the assets. Of course, certain limitations could be placed on this power such as requiring the pre-approval of an alternate agent, if the agent for the incapacitated spouse is the Community Spouse.

Provisions regarding changing beneficiaries, transferring assets to a revocable trust or an irrevocable trust, changing ownership of life insurance, amending or revoking a revocable trust, and creating a Special Needs Trust are additional provisions that could expand the agent's ability to engage in "protection planning." Of course, all of these suggestions are based on the assumption that the agent's actions comply with the principal's directions and estate planning goals. So, before you fill in the blanks of a standard form to save on legal fees, consider using a more powerful and individualized DPOA to protect your estate and accomplish your estate planning goals.

Planning for incapacity is an essential part of any estate planning process--an inexpensive way to ensure that your wishes will be carried out by the people you trust. Failing to plan for incapacity can result in expensive court intervention with the appointment of people who may only be able to guess as to what your wishes would have been, disputes among your family members, and lengthy delays in providing you with necessary medical care or financial assistance. The choice is yours while you have capacity.

Agent, attorney-in-fact, fiduciary, trustee, conservator of the estate, guardian of the person and guardian of the estate, are just a few of the terms used to describe a person (or an entity) who has the authority to act on behalf of an individual who is unable or unwilling to make his or her own decisions regarding finances or health care—also called a “substitute decision maker”. Ward, principal, subject, grantor, patient, and defendant, are just a few of the terms used to describe the individual who is unable or unwilling to make his or her own decisions regarding finances or healthcare. Health Care Power of Attorney and Declaration to Physicians (Living Will), Durable Power of Attorney, Joint Accounts and a wide variety of Trusts are all methods to appoint “substitute decision makers” that an individual can enter into voluntarily, if the individual is competent. Conservatorship is another mechanism to obtain a court-appointed substitute decision maker for an adult who believes that he/she is unable to manage his/her own assets or income. Guardianship is the mechanism to seek a court-appointed substitute decision maker for these same purposes, if the individual is not competent.

The terminology and the context in which the terms are used can have very different implications regarding the degree of authority that has been granted and the ability of the individual to revoke that authority. For example, a conservator can be appointed by the court at the request of an individual without a finding that the individual is incompetent. Wis. Stat. §54.76(5) An individual may want to have another person control his/her finances under certain circumstances (e.g. the individual realizes he/she is vulnerable to exploitation). Under a conservatorship, the individual retains the authority to petition the court to revoke the power of the Conservator and the court shall remove the conservator and order the assets and income restored to the individual, unless the court determines that the individual has become incapable of handling his or her income and assets. Wis. Stat. §54.76(4). On the other hand, when a Guardian of the Estate is appointed by the court, the order is typically permanent, at least until the assets are depleted.

Agent: A person or entity who has been appointed to act on behalf of an individual by that individual through the use of a Health Care Power of Attorney form or a Durable Power of Attorney form. The person or entity is usually referred to as the “health care agent” or the “financial agent” or just “agent”. For example, an agent may sign a check or other document on behalf of the individual by signing his/her own name followed by the initials “POA”. This term is interchangeable with “power of attorney” or “attorney-in-fact”.

Attorney-in-Fact: This is another term used for a person or entity who has been appointed to act on behalf of an individual by the individual through the use of a Durable Power of Attorney form. This term is frequently used in the context of real estate transactions. This term is interchangeable with “agent” or “power of attorney".

Activities of Daily Living (ADLs): Activities relating to the performance of self care, work, and leisure activities, including dressing, grooming, mobility, and object manipulation. Wis. Stats. §54.01(1). “Instrumental activities of daily living” means performing those actions necessary to provide the health care, food, shelter, clothes, personal hygiene, and other care without which serious physical injury or illness will likely occur. Wis. Stats. §54.01(19).

Capacity: Psychologists assess capacity—whether individuals have the evaluative ability to make knowing and voluntary decisions regarding advance directives, treatment, disposition of property, etc.

Competency: A legal determination that takes into consideration moral and other value judgments with regard to whether an individual requires assistance in making decisions or even requires that decisions regarding his/her person and property be based upon the substituted judgment of another individual, a guardian.

Declaration to Physicians (Living Will): Wis. Stats. §154.02 et seq. A written, witnessed document voluntarily executed by the declarant under Wis. Stat. §154.03(1) but not limited in form or substance to that provided in Wis. Stat.§ 154.03(2).

DNR Orders: Wis. Stats. §154.17 et seq. A written order issued under the requirements of Subchapter III of Chapter 154 of Wisconsin Statutes that directs emergency medical technicians, first responders and emergency health care facilities personnel not to attempt cardiopulmonary resuscitation on a person for whom the order is issued if that person suffers cardiac or respiratory arrest.

Durable Power of Attorney (DPOA): Wis. Stats. §243.07 (See Section D below)

Fiduciary: Can include persons named as trustees, financial agents, personal representatives, etc. A person who is required to act for the benefit of another person on all matters within the scope of their relationship; one who owes to another the duties of good faith, trust, confidence, and candor. Black’s Law Dictionary, Eighth Edition, p.658

Guardian of the Estate: A guardian of the estate is appointed because the individual, due to an impairment, is unable to effectively receive and evaluate information or to make or communicate decisions related to management of his or her property or financial affairs to the extent that any of the following applies: a. The individual has property that will be dissipated in whole or in part. b. The individual is unable to provide for his or her support. c. The individual is unable to prevent financial exploitation. The guardian of the estate manages and controls the individual’s financial matters, subject to the decisions of the financial agent under a valid Durable Power of Attorney.

Guardian of the Person: A guardian of the person is appointed because the individual, due to an impairment, is unable to effectively receive and evaluate information or to make or communicate decisions to such an extent that the individual is unable to meet the essential requirements for his or her physical health and safety. The guardian of the person makes all of the individual’s health care related decisions and other decisions regarding the individual’s care and custody, subject to the decisions of the health care power of attorney agent under a valid Health Care Power of Attorney.

Health Care Power of Attorney (HCPOA): See Wis. Stats. Ch.155 (See Section B below)

Incapacity: The inability of an individual to effectively receive and evaluate information or to make or communicate a decision with respect to the exercise of a right or power. Wis. Stats. §51.01(15).

Joint Accounts: Bank accounts and/or investment accounts that are owned jointly between two or more persons. “Joint ownership” is an undivided ownership shared by two or more persons. Typically, an owner’s interest, at death, passes to the surviving owner or owners by virtue of the right of survivorship.

Least Restrictive: Court-ordered placement or services that protect the individual in manner that protects the individual’s civil liberties as much as possible and are only as restrictive as necessary to assure the individual’s safety and wellbeing.

Other Like Incapacities: Those conditions incurred at any age that are the result of accident, organic brain damage, mental or physical disability, or continued consumption or absorption of substances, and that produce a condition that substantially impairs an individual from providing for his or her own care or custody. Wis. Stats. §54.01(22).

Patient Self Determination Act: Federal legislation that says all hospitals, nursing facilities, home health agencies, hospice programs and certain health maintenance organizations participating in Medicare and Medicaid programs must comply with certain requirements concerning advanced directives (42 U.S.C. §§1395(f)(1), 1396a(w)(1)).

Principal: The individual who signed the Health Care Power of Attorney and appointed health care agents to make health care decisions on his/her behalf.

The Health Care Power of Attorney (HCPOA) is one of the four forms of Advance Directives that are recognized under Wisconsin statutory law. Another form is the Declarations to Physicians (also known as the Living Will). The third form is a DNR Order. The fourth form is the “Authorization for Final Disposition”, a new form authorized by 2007 Wis. Act 58 which became effective March 19, 2008. A HCPOA is a signed, dated and witnessed document in which an adult may name a substitute decision maker to make health care decisions on his/her behalf in the event of incapacity. In a provision of artificial nutrition and hydration. Unless otherwise specified in the document, the individual's HCPOA takes effect only after a finding of incapacity by two physicians or one physician and a psychologist who have personally examined the individual.

The agent appointed in a HCPOA is to make decisions that conform with what the principal would do if he/she had the capacity to decide. If the principal’s wishes are unknown, the agent should decide on the basis of the principal’s best interests.

The HCPOA most often used is the Wisconsin Statutory form. On its face, it seems to be a form that could be completed without assistance. Unfortunately, some sections of the form are not self-explanatory. The following tips are helpful if you are completing the form yourself or assisting someone with the form:

Do not name more than one acting agent. You can name alternate agents but you can’t name co-agents.
If you are completing the form in an attempt to avoid guardianship and you trust your agent to make the decision regarding placement in a nursing home or community based residential facility, you should check the “yes” answers. (Some people think that they should check “no” because they would prefer to not go to a nursing home. They don’t realize that checking “no” has the effect of disempowering the agent and making it necessary to seek court intervention).
If you want to empower your agent to make the decisions related to withholding or withdrawing a feeding tube, you should check “yes”. If you never want your agent to be able to withhold or withdraw a feeding tube, check “no".
If you complete a Living Will, in addition to the HCPOA, be sure to include a sentence in the HCPOA that says your agent’s decision should be honored if there is ever a conflict between your agent’s decision and a physician’s decision.
Be sure you sign the form before 2 witnesses.
Give a copy of the form to your doctor.

The Wisconsin Statutory form can be modified to include additional provisions. However, if you modify the document, refer to the statute to make sure that the essential components of the form are included. Wis. Stat. §155.30. The NOTICE language is required in Wisconsin. The form must be signed before 2 witnesses who are old enough (at least 18) and are not the principal’s health care provider(s). For practical reasons, it is advisable to keep the two documents separate rather than combining the HCPOA and the Durable Power of Attorney into one longer document.

The Statutory form does include language permitting the release of medical information. However, many attorneys are not relying upon this language. Instead of waiting to see if access to health care information is denied, attorneys are adding a provision to the standard form to make a specific reference to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), 42 USC 1320d and 45 CFR parts 160 and 164 (“The Privacy Rule”), and recommending that clients sign an additional form which authorizes anyone acting as the person’s health care agent OR financial agent under a Durable Power of Attorney form, full access to the person’s medical and/or hospital records.

The following provision could be added to the Power of Attorney Health Care form in the appropriate section:

INSPECTION AND DISCLOSURE OF INFORMATION RELATING TO MY PHYSICAL OR MENTAL HEALTH

Subject to any limitations in this document, my health care agent has the authority to do all of the following:

(a) Request, review and receive any information, verbal or written, regarding my physical or mental health, including medical and hospital records.

(b) Execute on my behalf any documents that may be required in order to obtain this information.

(c) Consent to the disclosure of this information. I intend for my agent to be treated as I would be with respect to my rights regarding the use and disclosure of my individually identifiable health information or other medical records. This release authority applies to any information governed by the Health Insurance Portability and Accountability Act of 1996 (aka HIPAA), 42 USC 1320d and 45 CFR 160-164. I authorize: any physician, healthcare professional, dentist, health plan, hospital, clinic, laboratory, pharmacy or other covered health care provider, any insurance company and the Medical Information Bureau Inc or other health care clearinghouse that has provided treatment or services to me or that has paid for or is seeking payment from me for such services, to give, disclose and release to my agent, without restriction, all of my individually identifiable health information and medical records regarding any past, present or future medical or mental health condition, to include all information relating to the diagnosis and treatment of HIV/AIDS, sexually transmitted diseases, mental illness and drug or alcohol abuse.

NOTE: The authority given my agent shall supersede any prior agreement that I may have made with my health care providers to restrict access to or disclosure of my individually identifiable health information. The authority given my agent has no expiration date and shall expire only in the event that I revoke the authority in writing and deliver it to my health care provider."

The additional “HIPAA” form that can be made effective during a period of time when the Power of Attorney for Health Care may not be activated is included in the Appendix to these materials (See Appendix A) and titled “HIPAA Release and Authorization for ______________(client name)”. There may be a period of time when a patient is not considered incapacitated for the purpose of making his/her own health care decisions yet is unable to manage his/her finances and a financial agent is handling the patient’s financial affairs. If the financial agent is unable to access medical information, the agent’s ability to make decisions related to payment of medical expenses is extremely limited. The additional “HIPAA” form is extremely useful, under these limited circumstances. In addition to executing the “HIPAA” form, an individual should check with his/her health care provider to determine if the provider will accept the form. Some providers require the use of their forms and will not accept any other forms. The policies and practices in this area of medical care delivery are not uniform across the state making it difficult to provide advice to clients with any degree of certainty. The time to clarify these issues with a provider is prior to a crisis situation and prior to a loss of capacity.

Wisconsin law provides that “Unless otherwise specified in the power of attorney for health care instrument”, an individual’s power of attorney for health care takes effect upon a finding of incapacity by 2 physicians… or one physician and one licensed psychologist who personally examine the principal and sign a statement specifying that the person has incapacity. Wis. Stat. §155.05(2). The phrase “unless otherwise specified” has resulted in the use of HCPOA documents that either modify the requirement that the determination of incapacity must be made by health care providers and allow family members or friends to make the determination of incapacity OR remove the requirement of a finding of incapacity entirely and state that the power of attorney for health care is effective immediately, upon signing the document.

Although these modifications in the document are intended to provide reassurance to the principal that his/her health care decisions will be made by the agent as soon as he/she is even temporarily incapacitated, someone must still make a determination of incapacity before the health care provider can rely solely upon the decision(s) of the agent. Without the determination of incapacity, the provider must obtain the informed consent of the principal. “The desires of a principal who does not have incapacity supersede the effect of his or her power of attorney for health care at all times, [even an agent acting under an “immediate” HCPOA].” Wis. Stat.§155.05(4). The “activation” of the Power of Attorney for Health Care form by 2 physicians (or a physician and a psychologist) has historically been the triggering event that signals when the agent has the ultimate authority regarding health care decisions. Without a definite triggering event, providers would have to make the determination of capacity or incapacity on an ongoing basis and not be certain from one day to the next who they can rely upon as the decision-maker.

Any person of sound mind and 18 years of age or older may at any time voluntarily execute a declaration, which takes effect on the date of execution, authorizing the withholding or withdrawal of life-sustaining procedures or of feeding tubes when the person is in a terminal condition or a persistent vegetative state. The declaration must be signed by the declarant in the presence of 2 witnesses. The witnesses can’t be related to the declarant, have knowledge that he or she is entitled to inherit from the declarant’s estate, be directly financially responsible for the declarant’s health care, or an individual who is a healthcare provider. See Wis. Stat. §154.03.

The question is sometimes raised as to whether a person should have both the “Declaration to Physicians”, as described in Wis. Stat. §154.03, and the “Power of Attorney for Health Care”, as described in Wis. Stat. §155.30, or execute just one of the forms to avoid any possibility of a conflict between the two directives. There is minimal guidance provided in the statutes as to how a conflict between these two documents would be resolved except the following language in Wis. Stat. §155.70(3), which states:

“This chapter does not apply to the provisions of a valid declaration executed under subch. II of ch. 154, except that the provisions of a principal’s valid power of attorney for health care instrument supercede any directly conflicting provisions of a valid declaration executed under subch. II of ch. 154 for a declarant who is that principal.”

The “Just in Case” Position: Some patient advocates take the position that it is better to complete both forms “just in case” the appointed health care agents are unable or unwilling to act as agents for some reason or the principal has revoked his/her Power of Attorney for Health Care form. The Declaration to Physicians can then be used to make decisions under the limited circumstances described in the form; “terminal condition” or “persistent vegetative state”. The advocates who adopt this position would argue that the foregoing statute will resolve all conflicts between the two forms.

The “Rely on the Agent” Position: Some patient advocates take the position that only the Power of Attorney for Health Care form should be used because it authorizes the agent to make ALL health care decisions, including the decisions described in the Declaration to Physicians form, making the Declaration to Physicians form completely unnecessary. In addition, the advocates who take this position would argue that the foregoing statute which seems to resolve conflicts between the two forms in favor of the Power of Attorney for Health Care form, may not resolve a conflict between an “agent” and a physician if the “agent” is unable to point to a provision of the Power of Attorney for Health Care form that “directly conflicts” with the statement(s) in the Declaration to Physicians. Of course, the agent could attempt to argue that the Power of Attorney for Health Care, taken in its entirety, “directly conflicts” with any decision by the patient’s physician which differs from the decision(s) of the agent. This argument is based on the fact that the agent has the authority to make all health care decisions with a few very specific exceptions. As a practical matter, the decisions that must be made can’t wait for court intervention to determine which form prevails.

The “Cover all the Possibilities” Position: Some patient advocates take the position that both forms should be completed. The Declaration to Physicians form can be viewed as an expression of intent but not the final word. And, if the principal decides to execute both a Power of Attorney for Health Care and a Declaration to Physicians (Living Will) form, the following language should be included in the Power of Attorney for Health Care form under “Special Provisions” and in the Declaration to Physicians form to assure that conflicts between the two forms (the agent vs. the physician) will be resolved in favor of the agent.

In exercising authority under this document, my health care agent shall act consistently with my following stated desires, if any, and is subject to any special provisions or limitations that I specify. The following are specific desires, provisions or limitations that I wish to state (add more items if needed):

To the extent that any provisions of this Health Care Power of Attorney are deemed to conflict with my Declaration to Physicians, the provisions of my Health Care Power of Attorney shall prevail, and the decisions of my Health Care Agent shall be honored."

The Durable Power of Attorney form is perhaps one of the most powerful disability planning documents a person can use and is frequently overlooked or created as an afterthought. In addition to the standard powers to manage a person’s bank accounts, business assets and real property, the Durable Power of Attorney can include a variety of other powers to assure that a person’s assets are preserved to the extent possible and/or used for the purposes the principal intended. The following provisions may be added to the Durable Power of Attorney form:

A provision granting the agent the authority to fund a WisPACT I Trust with the principal’s assets, if the principal becomes disabled; and/or
A provision granting the agent the authority to declare a Special Needs Trust irrevocable upon funding by the agent with gifts from the principal; and/or
A provision authorizing gifting to the principal’s intended beneficiaries, including a disabled beneficiary. (The agent is authorized to transfer the disabled beneficiary’s gifts to the irrevocable Special Needs Trust); and/or
A provision specifically authorizing the agent to enter into a Personal Care Contract on behalf of the principal; and/or
A provision authorizing the agent to enter into and/or amend a Marital Property Agreement on behalf of the principal; and/or
A provision authorizing the agent to act as the guardian of the estate of the principal, if necessary, and to seek court approval to continue the Durable Power of Attorney, even if a guardian of the estate is appointed by the court.

The Wisconsin legislature recently enacted significant changes to the Wisconsin statutes governing guardianship and protective placement (See Chapter 54 of the Wisconsin Statutes). These changes to guardianship law became effective on December 1, 2006. The new statute gives much greater weight to pre-existing health care power of attorney and/or durable power of attorney documents. The new law specifically states that the court must dismiss the petition for guardianship if the court finds that advance planning by the ward renders guardianship unnecessary. Wis. Stat. §54.46(1).

If the court goes forward with the guardianship, the court must make specific findings as to why a guardian should be appointed despite the existence of previously executed and currently valid powers of attorney or other advance planning (joint accounts, trusts, etc.). In addition, the statute provides that the court shall appoint as guardian of the person the agent under a proposed ward’s power of attorney for health care, and/or as guardian of the estate the agent under a proposed ward’s durable power of attorney, unless the court finds that the appointment of the agent is not in the best interest of the proposed ward. Wis. Stats. §54.15(2) & (3). The statute also requires that the power of attorney documents shall remain in effect, even if it becomes necessary to appoint a guardian, unless good cause is shown to revoke or limit the power of attorney documents. Wis. Stats. §54.46(2)(a) & (b).

So, why would a guardianship be necessary, if an individual has executed valid power of attorney documents? A guardianship becomes necessary when the nursing home or hospital is unwilling to admit the person or continue providing treatment without the assurance that their actions are sanctioned by the court (via the guardian) when the patient is uncooperative and refuses placement and/or treatment. In these situations, a Petition to Appoint a Guardian of the Person and a Petition for Protective Placement are filed at the same time. Likewise, if the agent, under a valid durable power of attorney, is having a difficult time obtaining the full cooperation of a title company, bank, a pension plan administrator, or an investment company, the agent may find it necessary to be appointed by the court as guardian of the estate. In these situations, a Petition for Guardian of the Estate may be filed but the role of the guardian could be limited in scope to address a specific type of transaction or limited to a specific time period.

A guardianship may also be necessary when the agent or agents are neglecting their duties or perhaps even exploiting the principal. If a friend or family member of the principal observes that the agent is failing to make the necessary health care or financial decisions and the agent refuses to resign and permit the alternate agent to assume the role as agent, it could become necessary to seek appointment of a guardian and ask the court to revoke the power of attorney and rescind the agent’s powers.

Guardian of the Person. A guardian of the person is appointed because the individual, due to an impairment, is unable to effectively receive and evaluate information or to make or communicate decisions to such an extent that the individual is unable to meet the essential requirements for his or her physical health and safety. Wis. Stat. §54.10(3)(a)(2). The court must find that the individual’s need for assistance in decision making or communication can’t be met effectively and less restrictively through appropriate and reasonably available training, education, support services, health care, assistive devices, or other means that the individual will accept. Wis. Stat. §54.10(3)(a)(4). The evidence in support of the guardianship must support an argument that numerous attempts to assist the individual have been made and those efforts were either refused by the individual or the efforts had little or no effect on the individual’s inability to make decisions that would assure his/her health and safety. Once appointed, the guardian of the person must make decisions that place the least possible restriction on the individual’s personal liberty, make every effort to identify the individual’s preferences and whenever possible promote the individual’s integration into the community. Wis. Stat.§54.25(2)(d)(3).

The Guardian of the Person makes all of the individual’s health care related decisions and other decisions regarding the individual’s care and custody, subject to the decisions of the health care power of attorney agent under a valid Health Care Power of Attorney. Hopefully, the two roles are filled by the same person.

Guardian of the Estate. The guardian of the estate makes all of the individual’s financial decisions, assumes control over all the ward’s assets and is accountable to the court for any actions taken related to the individual’s finances. The decisions of the guardian of the estate must be made with the approval of the agent under a current valid durable power of attorney. Of course, this will be much easier if the role of guardian of the estate and the role of the financial agent are both assumed by the same person or entity.

An estate plan based on a Revocable Living Trust can also be a very effective method of assigning a substitute decision maker of your choice the role of managing your financial affairs. Provided all of your assets are governed by your trust (owned by the trust), the Trustee should be able to manage your assets either upon your resignation or upon a finding of incapacity. A trust provision regarding incapacity may contain one or both of the following provision(s):

"Incapacity of a Trustee other than a Grantor. If any individual Trustee becomes incapacitated, it shall not be necessary for the incapacitated Trustee to resign as Trustee. For Trustees other than one of us [one of the Grantors], a written declaration of incapacity by the Co-trustee, if any, or, if none, by the party designated to succeed the incapacitated Trustee, if made in good faith and if supported by a written opinion of incapacity by a physician who has examined the incapacitated Trustee, will terminate the trusteeship. If the Trustee designated in the written declaration refuses to sign the necessary medical releases needed to obtain the physician’s written opinion of incapacity within 10 days of a request to do so, the trusteeship will be terminated."

Definition of Incapacity of a Grantor.A Grantor shall be considered incapacitated during any time that the Grantor is unable to effectively manage his or her property or financial affairs, whether due to age, illness, mental disorder, dependence on prescription medication or other substances, or any other cause.

Determination of Incapacity of a Grantor. For purposes of this agreement, a Grantor is incapacitated if determined to be so under any one of the following subsections.

A Grantor shall be deemed incapacitated if two licensed physicians have determined the Grantor’s then existing circumstances fall within the definition of incapacity set forth in the above Definition.

A Grantor shall be deemed restored to capacity if the Grantor’s personal or attending physician signs a written opinion that the Grantor can effectively manage his or her property and financial affairs.

A Grantor shall be deemed incapacitated if a court of competent jurisdiction determines that the Grantor is legally incapacitated, incompetent, or otherwise unable to effectively manage his or her property or financial affairs.

A Grantor shall be deemed incapacitated if the Grantor has an unexplained disappearance or absence for more than 30 days or is detained under duress. A Grantor’s disappearance, absence, or detention under duress may be established by an affidavit of our Trustee, or, if no Trustee is serving under this agreement, by the affidavit of any beneficiary of any trust created under this agreement. The affidavit shall describe the circumstances of the Grantor’s disappearance, absence, or detention under duress. A third party dealing with our Trustee in good faith may always rely on the representations contained in the affidavit.

The Grantor shall be deemed restored to capacity upon written notice by the missing or detained Grantor to the successor Trustee that he or she can manage his or her property and financial affairs.

A Petition for Guardianship of the Estate should be considered unnecessary if the assets are owned by the trust and can be managed by a Trustee. The combination of the appointment of a Power of Attorney for Health Care and the appointment of a Successor Trustee under a Revocable Living Trust should be enough to eliminate the need for a Petition for Guardianship, in most cases. Situations that require Protective Placement orders will be the exception to this rule.

Before DRA-2005, "spend down" plans that included gifting assets to children were effective in preserving most of the applicant's assets, even if the gifting took place after the applicant entered the nursing home. After DRA-2005, this type of strategy won't work because the penalty period is calculated from the date the applicant is broke and would "otherwise be eligible for Medicaid". In other words, the penalty starts when the applicant (a single person) has only $2,000.00 in countable assets or, if the applicant is married, between $52,000.00 and $101,540.00 in assets. the amount a married couple can keep is 50% of the assets the couple owned on the date the applicant was first institutionalized(this is called the "snapshot date") with $52,000 being the minimum amount the couple can keep – the applicant can keep $2,000 and the community spouse can keep $50,000.

Under DRA-2005, a $20,000 gift that was given four (4) years before an applicant (a single person) is ready to apply for Medicaid because he/she has only $2,000 left, will face a penalty period (a period of time when Medicaid benefits are denied), of 3.75 months. This penalty period is calculated by dividing the total gift by the "penalty divisor". In 2006 the "penalty divisor" is $5,339.00 (the average cost of nursing home care per month in Wisconsin). The "penalty divisor" for 2007 will be announced later in January and apply to applicants who file after January 1, 2007. it is fair to assume that the divisor will be higher than $5,339.00 in 2007. You can find this information on the following website: www.emhandbooks.wi.gov/mech/

What can individuals and families do to preserve assets in light of the drastic changes in Medicaid rules? A few of the "old" strategies still work and most of the same advice still applies regarding the types of records you should keep and the documents you should consider creating.

KEEP GOOD RECORDS of all financial transactions so the application process goes smoothly. The records will need to cover the previous five (5) year period. if you can prove that a transfer was not a gift, you will be able to avoid a penalty period for the transfer.

Make sure your documents include a DURABLE POWER OF ATTORNEY FOR FINANCE that allows gifting and provides protections against financial abuse. For example, a Durable Power of Attorney for Finances could contain a gifting clause but could also require that at least two (2) of your financial "agents" must approve any gifts. The gifting clause could also limit the recipients of the gifts to people you name as your beneficiaries in your will in proportion to the shares those beneficiaries would have received.

A LIFE ESTATE DEED, a deed that says you have a lifetime right to live in the home and your children own the home after you die, is a useful strategy to consider when your goal is to transfer the home or proceeds from the sale of the home to your children after you and your spouse die. The Life Estate is considered an "exempt asset" assuming you apply for Medicaid at least 5 years after you sign the deed. The property will transfer outside of the probate process after you and your spouse die. The time to create a Lefe Estate Deed is when you are sure the home you are living in is your permanent residence. The cost to create a Life Estate Deed will range from $250 to $800 depending on the complexity of the family situation.

LONG TERM CARE INSURANCE is another option for some individuals and couples. If you are considering transferring some of your assets to your children to assure that they will have funds available to supplement your care, you may wish to obtain Long Term Care insurance for at least five (5) years – the five (5) year period after you make the "gift". Look for a policy that covers in-home services, assisted living services and nursing home care.

Other strategies that still work involve purchasing assets that are exempt under the Medical rules, transferring assets to "protected persons" and/or using a "Family Care Agreement". I will discuss these strategies in a subsequent article to be posted on this website. Until then, don't give away your property unless you are sure you understand the new Medicaid rules AND make sure you have up-to-date estate planning documents that grant the authority to gift to someone you trust who also understands the new rules.