Dear Mr. Miller: Introduction: Last month my father
had a stroke. He’s recovered now, to some extent. He can talk and
walk, but he has no ability to respond to what I am saying or
actually even carry on a conversation. When he’s talking, it’s like
he’s talking to an imaginary friend. And when I talk it is like he
really doesn’t even know I am talking.
His physician tells me he needs to be in a skilled nursing facility.
I have checked the pricing and for his care it will be close to
$10,000 per month. He has income of about $1500 per month so that is
going to be a problem. A friend told me to check out Medi-Cal. It
seems Medi-Cal will cover the difference but after Dad passes, they
are going to want their money back. And that will be taken out of
his only asset–his $250,000 Fresno house.
I want to protect the house so that it goes to me and my sister—that
is what Dad would have wanted. If he knew it was going to the state
he’d have a heart attack. I saw an attorney yesterday. He looked at
Dad’s Living Trust (a large notebook filled with various documents)
and said the financial power of attorney was just a basic form and
didn’t give me the authority I needed to protect the house.
How can that be? It was prepared by an attorney, signed and
notarized! Scared to Death Daughter!
Dear Scared: Living Trust
vs Living Trust Package: Let’s define our terms to keep things
clear. What consumers call a Living Trust is what many attorneys
call a Living Trust package. So there is often a disconnect in the
communication between the two. In other words, in the notebook there
are a number of documents. One, usually the fattest, is the actual
Living Trust. Another one is the Financial Power of Attorney. Other
ancillary documents such as the Will or Health Care Directive make
up the rest of the notebook. So when an attorney says “Living Trust”
he is typically referring to the actual single document in the
notebook that is the Living Trust, not the entire notebook
and the House: You are correct about the house. Although the
personal residence is exempt from Medi-Cal qualification, it is not
exempt from Medi-Cal recovery (i.e. Medi-Cal’s right to get their
money back from the estate of the deceased claimant). There are
exceptions if there is a surviving spouse and in a few other cases
that don’t seem to apply to your situation.
Solution to Medi-Cal
Recovery: In order to protect the house, it is typically gifted
away from the ill person’s ownership. (There are a number of
potential potholes here so any reader of this column should consult
an attorney before taking any action.) But in order to gift it away
(to you and your sister or to a special type of capital gain income
tax saving trust) your Dad would need mental competence, and from
your description, he clearly is without that, or someone with legal
authority to act for him. This legal authority is usually given in
the power of attorney document, sometimes in the Living Trust
Financial Powers of Attorney: In California there are a variety
of financial powers of attorney. The one that your Dad probably has
is referred to as the Statutory Form Power of Attorney. That means
that the language used in the document is substantially the same as
the California statute authorizing this form. There are two types:
the short form and the long form. They both have the same powers and
effect. The short form has check boxes for each power being granted.
Essentially, each check box grants a particular power as described
in the statute. The long form simply takes the descriptions in the
statutes and repeats them in the document, verbatim.
Advantages and Disadvantages of Statutory Form: The advantage of
the short form is, obviously, that it is short and, at least in
general, easily understood by a non-lawyer. The advantage of the
long form is that one does not have to review the California statute
to see the details of the particular power involved. The
disadvantage of both, and here is your problem, is that neither
grants the power holder the authority to give away the principal’s
(i.e. your Dad’s) assets. In other words, neither authorizes any
substantial gift giving. Worse, there is a power in the statutory
form entitled “Estate, Trust and other Beneficiary Transactions”
that, for the consumer, gives the incorrect impression that it
grants gift giving power. It does not! Doubly worse, at least a few
attorneys don’t know that impression is inaccurate!
for Gift Giving Power: Either form can be customized to grant
gift giving power but, at least in the ones I have reviewed, they
rarely do. And for those that do, they rarely give the power holder
the authority to gift to himself (often called a “self dealing”
clause). Without both of these clauses, you cannot gift any part of
the house to yourself. With just the gift giving power you could
gift to your sister but not yourself.
Attorney Should Cover in Interview: Now before you get all up in
arms about how this attorney was just too lazy to create a lawyer
drawn document, keep in mind that the statutory forms are quite
effective for what they are. That being said there should always be
(at least in my opinion) a discussion by the attorney with elderly
(or even middle aged clients) about Medi-Cal. If the client declines
that type of arrangement in his power of attorney, then so be it. I
don’t know what occurred between the attorney and your Dad so I
can’t comment on that issue.
Conclusion: You might also want to
check to see if any of the necessary powers are part of the Living
Trust. If you strike out there, then a court procedure is also a
possibility. Speak with an attorney knowledgeable in estate planning
and Medi-Cal (also known as Elder Law).