Incapacity Planning

Question 1

Incapacity

Answer 1

• lack of physical or intellectual power or legal qualification

Question 2

Incompetent

Answer 2

• not legally qualified
• lacking qualities needed for effective action (enter into contract)
• unable to function properly

Question 3

Power of attorney

Answer 3

• written document under which one person (principal) executes to empower another person (agent) to act on their behalf

Question 4

Durable power of attorney for health care (DPOAHC)

Answer 4

• appoints a person to make decisions on behalf of principal
• differs from DPOA
  1. medical decisions only
  2. springing power only (when patient cant communicate)
  3. drafted separately from DPOA

Question 5

Durable power of attorney for asset management

Answer 5

• can empower holder currently or only when principal becomes incapacitated
• death of principal terminated POA whether or not its durable

nontax related powers
- buy, sell, lease
- collect from debtors
- operate principals business
- sue on principals behalf
- refuse life prolonging procedures
- etc

tax related powers
- make gifts to spouse or other
- make disclaimers
- make living trusts
- complete transfers
- signing income and gift tax return
- special power of appointment

powers they cannot give
- execute or revoke will
- execute living will

Question 6

Durable feature

Answer 6

• enables principal to grant powers that remain in effect throughout incapacity

Question 7

Durable vs nondurable

Answer 7

• durable: authority of agent continues when principal becomes incapacitated
• nondurable: power ceases when principal is no longer legally competent

Question 8

Springing power

Answer 8

• agent has no authority over principal’s assets until incompetency

Question 9

General or limited powers

Answer 9

• General: grants agent power to deal with all principals assets and take any action on principals behalf
• limited (special): allows agent to perform only certain acts or control only specific property

Question 10

Advance medical directives (living wills)

Answer 10

• legal document which directs clients physician to discontinue life sustaining procedures if client is in a terminal condition or permanently unconscious
• clients right to refuse medical treatment

Question 11

DPOAHC

Answer 11

• client can name surrogate to make medical decisions

Question 12

Guardianship vs conservatorship

Answer 12

• guardian: personal decisions
• conservatorship: financial decisions
• court appointed and subject to courts supervision

Question 13

Revocable trust

Answer 13

• grantor can include provisions that specify management by trustee in event of grantors incompetency
• trustee authority to act is universally recognized, DPOA may not be in some states
• revocable trust continues after death, DPOA does not

Question 14

Medicaid planning

Answer 14

• means test: most states below $2k in countable assets
• wont qualify if they give assets away within 5 years of incurring LTC expenses
• could be ineligible if they have more than a certain amount in home equity
• must name state as remainder beneficiary on annuities

Question 15

Special needs trust (SNT)

Answer 15

• trust can protect disabled person from being exploited by dishonest people looking for money
• allows beneficiary to continue receiving public benefits, medicaid, section 8 housing, SSI
• trust can only pay for supplemental needs not covered by programs

Question 16

SNT vs OBRA

Answer 16

• OBRA is exception to 60 month lookback period for medicaid
• allows disabled person under 65 to remain eligible for medicaid by transferring assets to irrevocable OBRA “payback trust”
• if any assets remain in trust at death, state can be paid back for funds used for medicaid