Program for CEB Epic Program - Legal Specialization

1. Presented by
Sheri Sudweeks
EPIC 2015
Lesson 7
Estate and Incapacity Planning
200 S. Santa Cruz Avenue, Suite 100
Los Gatos, CA 95030
(408) 354-0200
www.sugaisudweeks.com
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 PC 4000-4545
 Contract capacity required to create (PC 4026)
 Agent may be person, organization, corporation, or
other legal person (PC 4200)
 Execution: (PC 4121) it must:
 Contain the date of execution;
 Be in writing and be signed by the principal or in the principal’s
presence and at his direction; and
 Be either acknowledged by a notary public or signed by two
witnesses who satisfy the requirements of PC4122
◦ Exception – Uniform Statutory Power of Attorney must be
notarized.

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 Agent
◦ Principal may designate in one or more powers of
attorney (PC 4202)
◦ When there are two or more agents, they must
act unanimously (PC 4202)
◦ Principal may designate successor agents (PC
4203)
◦ Last granted authority controls if there are
conflicts between documents (PC 4103(a))

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 Standard of Care
◦ -Prudent person dealing with the property of
another, unless special skill (PC 4321(a))
◦ Agent with special skill must observe standard of
care that would be observed by those with similar
skill or experience (PC 4321(b))
 Rights and Duties
◦ A general grant of authority gives agent all
authority to act that a person having capacity to
contract may carry out through an agent (PC
4261)

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 Compensation – agent is entitled to
reasonable compensation (PC 4204)
 Access to Confidential Information – must
disclose information to agent (PC 4235)

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 Powers that must be specifically granted:
◦ Create, modify, revoke, or terminate trust, in whole or in
part;
◦ Fund with principal’s property trust for principal;
◦ Make or revoke a gift of the principal’s property;
◦ Exercise the right to reject, disclaim, release, or consent to
a reduction…from an estate, trust, or another fund on
behalf of the principal;
◦ Create or change survivorship interest;
◦ Designate or change beneficiaries …
◦ Make a loan to agent.

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◦ Agent is free to act or not act, regardless of whether
the principal has become incapacitated, may refuse
to act in the future after having acted in some
previous matters and may resign. (PC 4207, 4230,
4152)
◦ However, an agent has a duty to complete a
transaction that the agent has commenced (PC
4230(b)).
◦ If the agent has agreed in writing to act for the
principal, the agent must act under the terms of the
agreement (PC 4230 (c))

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Duty to Communicate – Agent must
maintain reasonable contact with principal
(PC 4234(a))
Duty to Avoid Conflict of Interest – agent
must act solely in the benefit of principal
and avoid conflicts of interest (PC4232(b)).

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Revocation – (PC 4150-4151)
Revocable by principal under terms of POA
or in writing (PC 4151)
Dissolution or Annulment – (PC 4154(a)) –
authority of spouse or registered domestic
partner is revoked if marriage is dissolved
or annulled.

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 Third Parties are required to honor powers of
attorney (PC 4300)
 Third parties have right to seek proof from agent,
including proof of identity, specimen signatures of
principal and agent, and agent’s affidavit that
power is still in effect. (PC 4302, 4305)
 Failure to honor power can lead to award of
attorney fees to the agent in a court proceeding
(PC 4306(a), 4406 (b))

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 Includes individual health care instructions
and a power of attorney for health care
(PC4605)
 Authority only becomes effective on
determination that principal lacks capacity,
unless specifically stated otherwise (PC 4682)

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 Requirements to execute:
◦ Capacity as defined in PC 4609
◦ Execution – must include(PC 4673):
 Must include date executed
 Signed by principal or in principals name by another adult in his
presence and at his direction
 Witnessed by 2 witnesses under penalty of perjury, one of which
cannot be related to principal or entitled to part of principal’s
estate
 OR Notarized as alternative to witnesses
 ADDITIONAL Requirements if Execution is in a skilled Nursing
Facility – patient advocate or Ombudsmen designated by the
Department of aging must sign as one of the witnesses or in
addition to notarization

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 Agents
◦ Authority:
 Health care decisions to the same extent as the
principal (PC 4617)
 Postmortem decisions such as disposition of
remains, making anatomical gifts requesting an
autopsy or releasing medical records (PC 4683(b))
◦ Limits to authority:
 No commitment to mental health facility
 No convulsive shock treatment, psychosurgery,
sterilization, or abortion (PC 4652)
◦ Liability: no liability for health care decisions made in
good faith (PC 4741)

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 Revocation – principal may revoke by
◦ Designation of agent by informing the supervising health care provider
verbally or by signed writing (PC 4695 (a))
◦ Any portion or portions, other than appointment of agent may be
revoked at any time, in any manner that communicates an intent to
revoke (PC 4695 (b))
◦ Latter directive revokes former directive (PC 4698)
 Third Parties-
◦ Agent under Directive has priority over conservator for making health
care decisions (PC 2356)
◦ Health Care providers and institutions must comply with instructions
from agent as if from patient (PC 4733)
◦ Limited reasons allow a health care provide to decline to comply (i.e.
reasons of conscience)(PC 4734)
◦ Can petition court to enforce (PC 4766(e))
◦ Health Care provider or institution that intentionally violates directive is
subject to liability and damages that include attorney fees (PC 4742)

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Due Process in Competence Determination Act
(DPCDA) PC 810-813, 1801,1881,3201,3204,3208
-Codifies standards for a court to use in determining
whether a person has capacity to perform acts such as:
• Execute will
• Marry
• Contract
• Convey property
• Execute trust
• Make medical decisions
• Also applies to: amend or revoke will or trust, manage
personal and financial affairs, drive, divorce, apply for long
term care insurance, nominate a conservator, authorize
release of health information under HIPAA and CMIA

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Deficits in mental functions
-alertness and attention:
-level of consciousness or arousal, orientation to time and
place, ability to attend and concentrate
-information processing:
-short and long term memory, including immediate recall,
ability to understand, communicate with others (verbally or
otherwise), recognition of familiar objects and persons,
understand and appreciate quantities, can organize and carry
out actions in one’s own self interest, reason logically
-thought processes:
-severely disorganized thinking, hallucinations, delusions,
uncontrollable intrusive thoughts
- Ability to modulate mood and effect

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PC 6100(a) – every adult of sound mind may make a will.
PC 6100.5 – Cannot make a will if either of the following are true:
1. The individual’s mental capacity in not sufficient to be able to:
1. Understand the nature of the testamentary act
2. Understand and recollect the nature and situation of the
individual’s property
3. Remember and understand the individual’s relationship to
living descendents, spouse, parents, and others whose
interests are affected by the will, or
2. The individual suffers from a mental disorder with various
symptoms including delusions or hallucinations, that cause the
individual to devise property in a way that he or she would not
have done except for the delusions or hallucinations
 Conserved Person may still have capacity to make will (PC 1872 (c))

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 Not found in Trust Section of Probate Code (PC
15000-19403)
 Case law points to both requirements for
Testamentary Capacity and Capacity to Contract
(fact specific)

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 These are specifically listed in DPCDA
 Determine capacity under DPCPA and PC 812
 PC 812 Except for certain
exceptions(testamentary and medical decisions)a
person lacks capacity unless the person has the
ability to communicate verbally or by any other
means the decision and understands all of the
following:
◦ The rights, duties and responsibilities created by or
affected by decision
◦ The probable consequences for the decision maker, the
person affected by the decision
◦ The significant risks, benefits, and reasonable
alternatives involved in the decision

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 PC 4120 A natural person having the
Capacity to contract may execute a power
of attorney
 PC 4658 The primary care physician
determines if a patient lacks or has
recovered capacity to make health care
decisions

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 Ability to Communicate (PC 813)
 DPCDA

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 PC 1810 Effect of Proposed Conservatee
nomination of Conservator
 Capacity to make nomination
 PC1812 Nomination has priority of
appointment
 Court has discretion however to determine
that nominee is fit person
 Most prior nominations are in Powers of
Attorney and Advance Health care Directives

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 PC 1811Nomination by spouse or other relative
 Spouse, domestic partner and parent may
nominate a Conservator in writing either before
or after a petition is filed
 Brother or sister may nominate conservator in
petition or at hearing
 Preference of nomination is subordinate to the
nominator's class

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 PC 1500 Only a parent of the minor has the
authority to nominate a guardian of the
person and/or estate for the minor children.
 Adoptive parent has this authority, but legal
guardian does not.
 One parent can make the nomination if the
other parent joins, consents, is dead, or lacks
capacity.

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 PC 1501 Parent or other person may nominate a
guardian for the property the minor receives from
the nominator.
 Both 1500 and 1501 require a writing signed before
or after the filing of the petition, or at the hearing
for the petition.
 PC 1500.1 Imposes additional requirements for
children subject to the Indian Child Welfare Act
(ICWA- 25 I.S.C. Sec. 1901 et seq.)

26.  Method for giving gifts to minor’s without
guardianship proceeding (PC 3413), court may:
◦ Blocked account
◦ Custodian
◦ <$20,000 money may be held on any condition that
the court determines is in the best interest of the
minor
◦ <$5000 may be given to parent for minor
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27.  PC 3900 et al
 Custodian is nominated by instrument or
appointed by court
 Powers and Duties of custodian similar to trustee
(PC 3912-3913)
 Custodial property transfers to minor at 18
delayed under PC 3920.5
 Transfer to beneficiary at age 21 for irrevocable
gifts, if specified pursuant to PC 3909
 Transfer up to age 25 for custodianships created by
will, power of appointment, trust, or designation
in life insurance policy, if specified in document
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1. First Party Special Needs Trust
2. Third Party Special Needs Trust
3. Pooled Special Needs Trust

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42 USC Section 1396p(d)(4)(A)
 Provides funds for living expenses not covered by other
income sources
 Contains the assets of an individual with a disability
 Maintains eligibility for public benefits
 Must be established by parent, grandparent, legal guardian
or the court
 Beneficiary must be under 65
 State must be reimbursed from the trust for all Medi-Cal
expenses

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Establish a Third-Party SNT:
 Provides funds for living expenses not covered by
other income sources
 Maintains eligibility for public benefits
 Must be established by someone other than the
beneficiary with assets of someone other than the
person with the disability
 No State reimbursement from the trust for Medi-
Cal expenses
 Modification of Trusts under Probate Code Section
15409

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-Trusts pool the resources of many beneficiaries, and those
resources are managed by a non-profit association, that uses
separate accounts of pooled assets.
-Unlike individual disability trusts, which may be created only
for those under age 65, pooled trusts may be for beneficiaries
of any age and may be created by the beneficiary
herself/himself.
-Unless the account is retained by the trust, the State must be
reimbursed for all Medi-Cal expenses
42 USC Section 1396p(d)(4)(C)

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1. When the beneficiary meets the definition of
disabled for public benefits programs.
2. Beneficiary is receiving or is qualified to
receive needs based public benefits.
3. When there is uncertainty about whether or
not the beneficiary will qualify for public
benefits programs.

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SSI Definition (adult) – The inability to engage
in any substantial gainful activity (SGA) due
to any medically determinable physical or
mental impairment, that has lasted or can
be expected to last for a continuous period
of at least 12 months or result in death.

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1. Supplemental Security Income (SSI)
2. Medi-Cal

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The Social Security administration defines a 3rd party
trust as:
“a trust established by someone other than the
beneficiary as the grantor”
And imposes 2 requirements:
1. The beneficiary cannot have authority to revoke
the trust; and
2. The beneficiary cannot direct the use of the
trust assets for his or her support and
maintenance under the terms of the trust.

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Living v. Testamentary Trust
 If you are creating a 3rd party SNT for a
spouse, it must be established by will.
Revocable v. Non Revocable
 Beneficiary with disability must never have
power to revoke, but others can be given
the power

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Additional Things to Consider
-Trust may continue for many years, think ahead
about lifetime issues with regard to successor
trustees, ability to modify to keep current with
changes in the law.
- Never use a HEMS standard!!!!
- Distributions can be supplemental or
discretionary.
- When appropriate, can give limited power of
appointment.
- Spendthrift Provision.

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- Grantor: Must be established by parent,
grandparent, legal guardian, or court.
- Beneficiary: Trust must be for the sole
benefit of a disabled person who is under
the age of 65.
- Payback Provision: Trust must provide that
on the death of the beneficiary, the trustee
repays Medi-Cal (Medicaid).

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- Grantor: Must be established and managed by a nonprofit
association.
- Joinder – May be joined by the beneficiary, the beneficiary’s
parent, grandparent, legal guardian, or a court.
- Beneficiary: No age restriction on beneficiary, but must be
disabled and the trust must maintain a separate account for
the beneficiary.
- Trustee: the trustee must be the establishing nonprofit
association or supervised by the nonprofit.
- Payback Provision: Excess funds may remain in the pooled
trust for other beneficiaries with disabilities, if they do not
remain in the trust, they are subject to the payback rules.

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 A disclaimer is a refusal to accept an
interest in property.
 CA law is found in PC 260-295
 Federal Law is found in IRC 2518
 PC 265 requires a writing that refuses,
renounces, or disclaims an interest.
 IRC 2518 (b)(2) also requires a writing

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- Under CA Law
- Treated as never having owned the transferred
property for any state law purpose
- Irrevocable and binding
- Binding against creditors, except IRS tax lien and
some Bankruptcy orders
Under Federal Law
-Qualified Disclaimer
-not treated as taxable transfer
-countable transfer for SSI

42. Welfare Benefits Entitlement Benefits
Supplemental Security Income (SSI) SSA
Medi-cal SSDI
Long term Medicare
Community Based VA (disability)
VA (pension)
Section 8 (HUD)
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◦ Income Limits
 Cash
 Non-Cash
 ISM
Exceptions: $20 any income, $65 from
earnings, plus half over $65, irregular or
infrequent earned and unearned, income
tax refunds, food stamps, welfare housing

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 Asset limits
 Countable assets over $2000(single)/$3000(couple)
- cash, joint bank accounts, property, liquid
assets, revocable trusts, some irrevocable trusts
 Non-Countable assets – home(if residence), auto,
personal effects and household goods, wedding
and engagement rings, property for medical care,
tools of trade or business, up to $1,500 cash value
insurance policy, burial space, $1500 burial fund,
SNT

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 Benefits available
◦ Federal Contribution is $733.00
◦ State Supplement $156.40
◦ California = $889.40
◦ Non-Medical Board and Care Rate $1145 (of
which $131 is personal needs allowance)
◦ Medi-Cal/Medicaid

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 Benefit Reductions
◦ Cash
◦ Housing Circumstances
 Board and Care
 SNF
 ISM
 PMV

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 Social Security will categorize any distribution you
make to or for the beneficiary as some form of
income, subject to its “income rules.” Then, if the
income buys some kind of asset (or becomes an
asset itself such as money in a bank account), the
asset will be subject to separate “resource rules.”
 Classifying the expenses from the trust as “income”
or as a “resource” will usually make a big difference
to the beneficiary's eligibility and benefit levels, so it
is important to have some understanding of them.

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Countable Resources
 Generally, a “countable resource” is any asset considered
by SSI rules to determine eligibility (therefore a resource is
sometimes called a “countable asset”). It could be tangible,
like a second car, or it could be intangible, like a savings
account. An SSI recipient and beneficiary is allowed to have
only $2,000 or less in “resources.” If resources exceed
$2,000 during any whole calendar month (even by a few
cents), the beneficiary's public benefits may be terminated.
 Income that is received during the month is considered
“income” throughout the calendar month or receipt, even if
it is deposited in a bank account. If, at the end of the
month, it is still in the account, it becomes a “resource” in
the next month and is then subject to “resource” rules.

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Excluded Resources
The beneficiary is allowed to have certain exempt assets, which are excluded from the $2,000
limit. These exempt assets are not counted in determining eligibility, and the beneficiary's
ownership of them will not jeopardize his/her SSI benefits. Therefore, you may freely purchase
exempt assets for the beneficiary and give them to him/her (except for food and shelter, as
explained below). You should not give the beneficiary the money to purchase exempt assets
herself--payments of money are always considered countable income as explained below. The
following assets are exempt:
(1) A home, including adjacent land, if the beneficiary lives in it or intends to return to it;
(2) Household goods (furniture, furnishings, household equipment, household supplies), and
personal effects (toiletries, items of personal care and education, and jewelry--however, giving
the beneficiary food is “in-kind support,” as explained below)--all limited to a total value of
$2,000;
(3) One automobile (or other vehicle)
(4) Life insurance with a cash surrender value, if its face value is less than $1,500, and all
term life insurance;
(5) A burial plot, or other burial space, worth any amount; and
(6) A revocable burial fund, worth up to $1,500.

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Excluded Resources
You might note that a number of common and useful
items are not specifically mentioned as exempt in the
SSI regulations, but are not counted because they are
included among “personal effects” or are services.
These include:
(1) Recreational equipment, games and crafts
(2) Books and magazines
(3) Telephone, answering machine
(4) Television, radio and cable service
(5) Musical instruments and stereo
(6) Travel and education
(7) Recreation and entertainment
(8) Some home maintenance, such as gardening

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Even though the trust principal is not considered a resource
of the SSI beneficiary, disbursements from the trust may be
considered “income” to the beneficiary, depending on the
nature of the disbursement. SSI rules will treat distributions
you decided to make from the trust in one of four ways:
i. Direct “income” to the beneficiary;
ii. “Not income;”
iii. “In-kind income;” or
iv. “In-kind support and maintenance.”
We will discuss these in order. Remember, if your distribution
becomes an asset, SSI rules will treat it as either a “countable
resource” or an “excluded resource,” which we discussed
above.

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Direct Income
Any money you give to the beneficiary directly will be
considered income to the beneficiary, and will reduce his/her SSI
benefits on a $1-for-$1 basis. As a result, you should avoid making
direct payments to the beneficiary, since there will be no net
advantage from doing so. If your actions reduce the beneficiary's
SSI benefits to zero, then both the beneficiary's SSI and Medi-Cal
benefits will be jeopardized, because the Medi-Cal benefits
depend on SSI eligibility.
You may not reimburse the beneficiary for purchases he/she has
made, even if the purchases are for exempt assets. The payment
will simply be counted as direct income. In addition, SSI rules say
that if you give the beneficiary anything that is equivalent to cash
(such as postage stamps), it will be counted as direct income.

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Not Income
Other kinds of distributions from the trust are “not
income” because they are not cash, nor are they food
or shelter. Examples of benefits that are “not income”
include payments you make to someone other than
the beneficiary, such as for certain kinds of medical
care and social services. Also, bills you pay for the
beneficiary to receive services are not income from
you. However, if the beneficiary receives any asset as a
result of your paying the bill, the value she receives is
counted under the “in-kind income” rules discussed
below.

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 Welfare Benefit – State and Federal
 Eligibility
◦ SSI –automatically qualified for Medi-Cal
◦ Medically Needy
 Low income persons over 65 may qualify for
Disabled Federal Poverty Level Program
 Low income persons with dependent children
 Children under 21
 Pregnant women
 Medically indigent adults in SNF

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 Income Requirements – if income is greater than
$1138, everything over needs amount will be share
of cost
◦ Maintenance Needs Standard - $600 monthly for
community based Medi-Cal
◦ Personal needs allowance – $35 for Long Term Care
Medi-Cal
◦ Other Deductions – “any income deduction of $20,
monthly medical premiums , such as Medicare Part
B, old medical bills, medically necessary supplies,
equipment or services not covered by Medi-Cal

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 Health Care Services that are “medically
necessary”
 Some prescriptions, physician visits, adult day
health services, some dental care, ambulance
services, some home health, x-ray and
laboratory costs, orthopedic devices, hearing
aids, some medical equipment, vision test

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 Home and Community Based Services
(HCBS) Waivers
 In Home Support Services (IHSS) –
administered by County Social Services
Department

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