Author Archives: Administrator

CBO says House Speaker Nancy Pelosi’s drug pricing plan saves Medicare $345 billion over decade

November 18, 2019

NAELAeBulletin:  House Speaker Nancy Pelosi’s bill to lower prescription drug prices would save Medicare $345 billion over 10 years, according to a preliminary analysis from the nonpartisan Congressional Budget Office. 

The savings wouldn’t begin until 2023, assuming the bill gets passed by both the House and Senate and signed by President Donald Trump before the end of this year, the CBO said in the report released late Friday. The greatest savings would come in 2028 at $93 billion, according to the CBO, an independent agency that reviews congressional spending.

The CBO said the largest savings would come from the provision that allows Medicare to negotiate lower prices on as many as 250 of the most expensive drugs per year and apply those discounts to private health plans across the U.S. The legislation includes a penalty on pharmaceutical companies that refuse to negotiate or fail to reach an agreement with the U.S. government, starting at 65% of the gross sales of the drug in question.

The lower prices under the legislation would immediately lower current and expected future revenues for pharmaceutical companies, according to the CBO. The plan would also alter drug manufacturers’ incentives and have broad effects on the drug market, the CBO said.

“A manufacturer that was dissatisfied with a negotiation could pull a drug out of the U.S. market entirely, though CBO expects that would be unlikely for drugs already being sold in the United States,” CBO Director Phillip Swagel said in the report.

Current rules prohibit the Department of Health and Human Services from negotiating drug prices on behalf of Medicare — the federal government’s health insurance plan for the elderly. Private insurers use pharmacy benefit managers to negotiate drug rebates from pharmaceutical manufacturers in exchange for better coverage.

Pelosi and other House Democratic leaders had been working on the plan for months. The legislation is expected to move through House committees to a vote on the floor as soon as the end of this month.

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, who is currently rallying support for a Senate drug pricing bill backed by Trump, praised Pelosi’s CBO score but noted that any bill that passes would likely need to be bipartisan.

“The legislation I authored with Ranking Member [Ron] Wyden [D-Ore.] strikes that balance and would achieve real progress for Americans,” Grassley said. “To date, it’s the only significant, bipartisan legislation to lower prescription drug prices that’s passed a congressional committee.”

He continued: “I urge my colleagues in the House and the Senate to get to work to lower costs while ensuring life-saving treatments can continue to be developed right here in America.”

High prescription drug costs have become a rare bipartisan issue, with lawmakers on both sides of the aisle demanding changes. Congress and the Trump administration are trying to pass legislation before the end of the year that would bring more transparency to health-care costs and, ultimately, lower costs for consumers.

Trump, who is seeking re-election, signed an executive order earlier this month that he said would improve private Medicare plans for seniors.

The order is intended to bolster Medicare Advantage, which is private Medicare insurance for seniors. It’s also intended to offer more affordable plan options, encourage wider use of telehealth services and promote wellness benefits, among other provisions.

The White House did not immediately respond to a request for comment on the CBO score.

Last month, Pelosi said she hoped to work with Trump on a bill to lower drug prices even after launching a formal impeachment inquiry the day before.

In response, Trump accused Pelosi of trying to distract voters from the Democratic impeachment inquiry.

Providing Medicare Beneficiaries with Complete, Objective Information to Help Them Make the Best Enrollment Decision

November 18, 2019

NAELAeBulletin: UPDATED FOR 2109
The Center for Medicare Advocacy and the National Committee to Preserve Social Security and Medicare have partnered once again on an education and outreach project to support Medicare beneficiaries and those who assist them enroll and re-enroll in Medicare. The Medicare Fully Informed Project provides a variety of unbiased, accurate and comprehensive information about the full range of Medicare coverage options, and includes an array of tools to assist in making the best individual enrollment choices.

Making Medicare coverage decisions is a complex task with multiple personal factors that must be taken into account. Beneficiaries need help in understanding all their complex options including all the pros and cons of traditional Medicare and private Medicare Advantage. They need to make fully informed choices given their likely health needs, personal and financial circumstances, and possible cost-sharing assistance. Our organizations and other beneficiary advocates have been concerned about the objectivity of some Centers for Medicare & Medicaid Services (CMS) enrollment materials. We hope to help fill some of the gaps.

In preparing for this project, we polled over 2,000 members of the National Committee to Preserve Social Security and Medicare in August 2018 in order to better understand Medicare beneficiaries, their unique needs, Medicare choices, and how we can better serve them. The responses helped us identify knowledge gaps and develop the suite of materials developed for this project. Key survey results that informed this project include:

    • 61% of respondents are in traditional Medicare
    • 54% of respondents make enrollment decisions through on-line research
    • Half of all respondents said they want more information about their enrollment choices
    • 77% receive the annual Medicare & You handbook from CMS
    • Less than half of respondents comparison shop between Medicare Advantage and Part D prescription drug plans
    • Only 13% changed their Medicare Advantage plan or Part D plans in the last year
    • 57% have one or more pre-existing health condition
    • 57% are not aware of Medicare’s Extra-Help program
    • Male respondents made up about 45%; female respondents comprised 54%
    • 54% live in suburban areas while 25% live in rural areas and 20% in urban areas

The results of the poll confirm that Medicare beneficiaries need additional, objective tools and information to make informed decisions about their Medicare options. They are also a diverse group who often face significant barriers when switching between plans or navigating these complex programs.

The goal of the Medicare Fully Informed Project is to help by providing a variety of educational tools for beneficiaries, and those who help beneficiaries, make enrollment decisions. We hope these various formats will help beneficiaries make fully informed Medicare and related health care coverage decisions. Project materials updated for 2019 include the following:

The 2020 Social Security Increase Will Be Smaller than 2019’s

November 18, 2019

The Social Security Administration has announced a 1.6 percent increase in benefits in 2020, nearly half of last year’s change. The small rise has advocates questioning whether the government is using the proper method to calculate the cost of living for older Americans and those with disabilities.

Cost-of-living increases are tied to the consumer price index, and a modest upturn in inflation rates and gas prices means Social Security recipients will get only a small boost in 2020. The 1.6 percent increase is lower than last year’s 2.8 percent rise and the 2 percent increase in 2018. The average monthly benefit of $1,479 in 2019 will go up by $24 a month to $1,503 a month for an individual beneficiary, or $288 yearly.

The cost-of-living change also affects the maximum amount of earnings subject to the Social Security tax, which will grow from $132,900 to $137,700.

For 2020, the monthly federal Supplemental Security Income (SSI) payment standard will be $783 for an individual and $1,175 for a couple.

The smaller increase may mean that additional income will be entirely eaten up by higher Medicare Part B premiums. The standard monthly premium for Medicare Part B enrollees is forecast to rise $8.80 a month to $144.30. According to USA Today, advocates are questioning the method used to calculate cost-of-living increases. The Bureau of Labor Statistics uses the Consumer Price Index for Urban Wage Earners and Clerical Workers to set the inflation rate. This method looks at prices for gasoline, electronics, and other items that younger workers rely on. The advocates suggest using a different index (the Consumer Price Index for Elderly) that puts greater emphasis on medical and housing expenses.

Most beneficiaries will be able to find out their cost-of-living adjustment online by logging on to my Social Security in December 2019. While you will still receive your increase notice by mail, in the future you will be able to choose whether to receive your notice online instead of on paper.

For more on the 2020 Social Security benefit levels, click here.

Medicaid’s Power to Recoup Benefits Paid: Estate Recovery and Liens

November 18, 2019

Federal law requires the state to attempt to recover the long-term care benefits from a Medicaid recipient’s estate after the recipient’s death. If steps aren’t taken to protect the Medicaid recipient’s house, it may need to be sold to settle the claim.

For Medicaid recipients age 55 or older, states must seek recovery of payments from the individual’s estate for nursing facility services, home and community-based services, and related hospital and prescription drug services. States also have the option of recovering all Medicaid benefits from individuals over age 55, including costs for any medical care, not just long-term care benefits.

There are a few exceptions. The state cannot recover from the estate of a Medicaid recipient who has a surviving spouse until after the spouse passes away. After the spouse dies, the state may file a claim against the spouse’s estate to recover money spent for the Medicaid recipient’s care. The state also cannot recover from the estate if the Medicaid recipient had a child who is under age 21 or a child who is blind or disabled.

While states must attempt to recover funds from the Medicaid recipient’s probate estate, meaning property that is held in the beneficiary’s name only, they have the option of seeking recovery against property in which the recipient had an interest but which passes outside of probate (this is called “expanded” estate recovery). This includes jointly held assets, assets in a living trust, or life estates. Given the rules for Medicaid eligibility, the only probate property of substantial value that a Medicaid recipient is likely to own at death is his or her home. However, states that have not opted to broaden their estate recovery to include non-probate assets may not make a claim against the Medicaid recipient’s home if it is not in his or her probate estate.

In addition to the right to recover from the estate of the Medicaid beneficiary, state Medicaid agencies may place a lien on real estate owned by a Medicaid beneficiary during his or her life unless certain dependent relatives are living in the property. The state cannot impose a lien if a spouse, a disabled or blind child, a child under age 21, or a sibling with an equity interest in the house is living there.

Once a lien is placed on the property, if the property is sold while the Medicaid beneficiary is living, not only will the beneficiary cease to be eligible for Medicaid due to the cash from the sale, but the beneficiary would have to satisfy the lien by paying back the state for its coverage of care to date. In some states, the lien may be removed upon the beneficiary’s death. In other states, the state can collect on the lien after the Medicaid recipient dies. Check with your attorney to see how your local agency handles this.

There are some circumstances under which the value of a house can be protected from Medicaid recovery. The state cannot recover if the Medicaid recipient and his or her spouse owned the home as tenants by the entireties or if the house is in the spouse’s name and the Medicaid recipient relinquished his or her interest. If the house is in an irrevocable trust, the state cannot recover from it.

In addition, some children or relatives may be able to protect a nursing home resident’s house if they qualify for an undue hardship waiver. For example, if a Medicaid recipient’s daughter took care of him before he entered the nursing home and she has no other permanent residence, she may be able to avoid a claim against his house after he dies. Consult with your attorney to find out if the undue hardship waiver may be applicable.

Don’t Let Medicare Open Enrollment Go By Without Reassessing Your Options

November 18, 2019

Medicare’s Open Enrollment Period, during which you can freely enroll in or switch plans, runs from October 15 to December 7. Don’t let this period slip by without shopping around to see whether your current choices are the best ones for you.

During this period you may enroll in a Medicare Part D (prescription drug) plan or, if you currently have a plan, you may change plans. In addition, during the seven-week period you can return to traditional Medicare (Parts A and B) from a Medicare Advantage (Part C, managed care) plan, enroll in a Medicare Advantage plan, or change Advantage plans. Beneficiaries can go to or call 1-800-MEDICARE (1-800-633-4227) to make changes in their Medicare prescription drug and health plan coverage.

According to the New York Times, few Medicare beneficiaries take advantage of open enrollment, but of those that do, nearly half cut their premiums by at least 5 percent. Even beneficiaries who have been satisfied with their plans in 2019 should review their choices for 2020, as both premiums and plan coverage can fluctuate from year to year. Are the doctors you use still part of your Medicare Advantage plan’s provider network? Have any of the prescriptions you take been dropped from your prescription plan’s list of covered drugs (the “formulary”)? Could you save money with the same coverage by switching to a different plan?

For answers to questions like these, carefully look over the plan’s “Annual Notice of Change” letter to you. Prescription drug plans can change their premiums, deductibles, the list of drugs they cover, and their plan rules for covered drugs, exceptions, and appeals. Medicare Advantage plans can change their benefit packages, as well as their provider networks.

Remember that fraud perpetrators will inevitably use the Open Enrollment Period to try to gain access to individuals’ personal financial information. Medicare beneficiaries should never give their personal information out to anyone making unsolicited phone calls selling Medicare-related products or services or showing up on their doorstep uninvited. If you think you’ve been a victim of fraud or identity theft, contact Medicare.

Here are more resources for navigating the Open Enrollment Period:

  • Medicare Plan Finder, which helps you find a plan to match your needs:
  • Medicare coverage options:
  • The 2020 Medicare & You handbook, which all Medicare beneficiaries should have received. The handbook can also be downloaded online at:
  • The Medicare Rights Center:
    Your State Health Insurance Assistance Program, which offers independent counseling:

What to Look for When Buying an Annuity

October 15, 2019

An annuity can be a useful tool for long-term care  planning, but annuities are also complex financial products that are hard to understand. If purchasing an annuity, you need to consider your options carefully.

An annuity is a contract with an insurance company under which the consumer pays the company a certain amount of money and the company sends the consumer a monthly check for the rest of his or her life, or for a certain term. Annuities come in many flavors. They can be deferred (begin paying out at a later date) or immediate (begin paying out right away). They can pay a fixed amount each month or pay out a variable amount based on how the money is invested. While a fixed immediate annuity can be a good Medicaid planning option for a married couple, other annuity products can be quite complex and confusing and are not right for everyone.

If you have decided an annuity is the right choice for your long-term care or retirement plan, you need to shop around to find the right product. The following are some purchasing tips:

    • Check the terms. Be sure to read the annuity contract carefully. Annuities often have surrender charges that penalize you for withdrawing your money too early. You need to understand for how long you won’t be able to access your money and when payouts begin. There may also be other fees associated with the annuity as well as optional riders. Understanding the fees will allow you to shop around to find the best product.
    • Choose your salesperson. Insurance companies often pay generous commissions to the brokers who sell their particular annuities, payments that many of the brokers don’t disclose. They also generally don’t disclose whether they are paid more or less by one insurance company than another or whether the annuity being sold is the best option for the consumer. Ask your broker questions to determine how they are paid. You may want to seek a second opinion to make sure your salesperson isn’t steering you into a product that isn’t right for you.
    • Select a sound insurance company. Annuity payments are often supposed to last a lifetime, so you want an insurance company that will stick around. Make certain that the insurer is rated in the top two categories by one of the services that rates insurance companies, such as A.M. Best, Moody’s, Standard & Poor’s, or Weiss.

Tips for Preventing, Detecting, and Reporting Financial Abuse of the Elderly

October 15, 2019

Reports of elder financial abuse continue to  increase, and the elderly are particularly vulnerable to scams or to financial abuse by family members in need of money.

It is hard to ascertain the exact numbers of people affected by elder abuse because studies show that elder abuse is underreported. However, one study found that financial loss from financial elder abuse could be close to $3 billion a year.

While it is impossible to guarantee that an elderly loved one is not the victim of financial abuse, there are some steps you can take to reduce the chances. One option is to have more than one family member involved in caring for the loved one. You can also encourage the elder to get involved in community activities to ensure that he or she has a wide range of support. Using direct deposit as much as possible is also helpful. And of course you should always screen caregivers carefully and verify references.

Financial abuse can be very difficult to detect. The following are some signs that a loved one may be the victim of this kind of abuse:

  • The disappearance of valuable objects
  • Withdrawals of large amounts of money, checks made out to cash, or low bank balances
  • A new “best friend” and isolation from other friends and family
  • Large credit card transactions
  • Signatures on checks that look different
  • A name added to a bank account or newly formed joint accounts
  • Indications of fear of caregivers

If you suspect someone of being financially abused, there are several actions you can take:

  • Report the possible crime by calling your local Adult Protective Services and state attorney general’s office. File a police report.
  • Explore options at your local probate court if your state has such courts. The court can intervene if someone in the family is misusing a power of attorney or their role as guardian or conservator.
  • Contact advocacy organizations. The National Center on Elder Abuse offers guidance on how to investigate and seek justice for elder abuse. State laws vary, but some have elder abuse statutes and may be able to get restitution for breach of fiduciary duties.
  • Try to get a temporary restraining order from a court while building your case.

Another valuable resource is Aging in Place’s guide to recognizing elder abuse.

Most Are Taking Social Security at the Wrong Time

October 15, 2019

A new report finds that almost no retirees are  making financially optimal decisions about when to take Social Security and are losing out on more than $100,000 per household in the process. The average Social Security recipient would receive 9 percent more income in retirement if they made the financially optimal decision.

When claiming Social Security, you have three options: You may begin taking benefits between age 62 and your full retirement age, you can wait until your full retirement age, or you can delay benefits and take them anytime up until you reach age 70. If you take Social Security between age 62 and your full retirement age, your benefits will be reduced to account for the longer period you will be paid. If you delay taking retirement, depending on when you were born, your eventual benefit will increase by 6 to 8 percent for every year that you delay, in addition to any cost-of-living increases.

The new report, conducted by United Income, an online investment management and financial planning firm, found that only 4 percent of retirees make the financially optimal decision about when to claim Social Security. Nearly all of the retirees not optimizing their benefits are claiming benefits too early. The study found that 57 percent of retirees would build more wealth if they waited to claim until age 70. However, currently more than 70 percent of retirees claim benefits before their full retirement age. Claiming before full retirement is the financially best option for only 6.5 percent of retirees, according to United Income.

The consequences of claiming Social Security too early can be big. The report found that collecting benefits at the wrong time causes retirees to collectively lose $3.4 trillion in potential income (an average of $111,000 per household). The report also estimates that elderly poverty could be cut in half if retirees claimed benefits at the financially optimal time.

One reason most people do not optimize Social Security is because waiting to collect benefits means their overall wealth may fall during their 60s and 70s. They also may not be aware that collecting benefits before full retirement age means that their benefits will be permanently reduced. According to the report’s authors, policy changes are necessary to get retirees to wait to claim benefits. The report recommends that early claiming be made the exception and reserved for those who have a demonstrable need to collect early. Another recommendation is to change the label on early retirement and call it the “minimum benefit age.”

To read the full report, click here.

For a CBS News article on the report, click here.

How to Use a Trust in Medicaid Planning

October 15, 2019

With careful Medicaid planning, you may be able
to  preserve some of your estate for your
children or other heirs while meeting Medicaid’s low asset limit.

The problem with transferring assets is that you have given them away. You no longer control them, and even a trusted child or other relative may lose them. A safer approach is to put them in an irrevocable trust. A trust is a legal entity under which one person — the “trustee” — holds legal title to property for the benefit of others — the “beneficiaries.” The trustee must follow the rules provided in the trust instrument. Whether trust assets are counted against Medicaid’s resource limits depends on the terms of the trust and who created it.

A “revocable” trust is one that may be changed or rescinded by the person who created it. Medicaid considers the principal of such trusts (that is, the funds that make up the trust) to be assets that are countable in determining Medicaid eligibility. Thus, revocable trusts are of no use in Medicaid planning.

Income-only trusts

An “irrevocable” trust is one that cannot be changed after it has been created. In most cases, this type of trust is drafted so that the income is payable to you (the person establishing the trust, called the “grantor”) for life, and the principal cannot be applied to benefit your or your spouse. At your death the principal is paid to your heirs. This way, the funds in the trust are protected and you can use the income for your living expenses. For Medicaid purposes, the principal in such trusts is not counted as a resource, provided the trustee cannot pay it to you or your spouse for either of your benefits. However, if you do move to a nursing home, the trust income will have to go to the nursing home.

You should be aware of the drawbacks to such an arrangement. It is very rigid, so you cannot gain access to the trust funds even if you need them for some other purpose. For this reason, you should always leave an ample cushion of ready funds outside the trust.

You may also choose to place property in a trust from which even payments of income to you or your spouse cannot be made. Instead, the trust may be set up for the benefit of your children, or others. These beneficiaries may, at their discretion, return the favor by using the property for your benefit if necessary. However, there is no legal requirement that they do so.

One advantage of these trusts is that if they contain property that has increased in value, such as real estate or stock, you (the grantor) can retain a “special testamentary power of appointment” so that the beneficiaries receive the property with a step-up in basis at your death. This will also prevent the need to file a gift tax return upon the funding of the trust.

Remember, funding an irrevocable trust within the five years prior to applying for Medicaid (the “look-back period”) may result in a period of ineligibility. The actual period of ineligibility depends on the amount transferred to the trust.

Testamentary trusts

Testamentary trusts are trusts created under a will. The Medicaid rules provide a special “safe harbor” for testamentary trusts created by a deceased spouse for the benefit of a surviving spouse. The assets of these trusts are treated as available to the Medicaid applicant only to the extent that the trustee has an obligation to pay for the applicant’s support. If payments are solely at the trustee’s discretion, they are considered unavailable.

Therefore, these testamentary trusts can provide an important mechanism for community spouses to leave funds for their surviving institutionalized husband or wife that can be used to pay for services that are not covered by Medicaid. These may include extra therapy, special equipment, evaluation by medical specialists or others, legal fees, visits by family members, or transfers to another nursing home if that became necessary. But remember that if you create a trust for yourself or your spouse during life (i.e., not a testamentary trust), the trust funds are considered available if the trustee has the ability to use them for you or your spouse.

Supplemental needs trusts

The Medicaid rules also have certain exceptions for transfers for the sole benefit of disabled people under age 65. Even after moving to a nursing home, if you have a child, other relative, or even a friend who is under age 65 and disabled, you can transfer assets into a trust for his or her benefit without incurring any period of ineligibility. If these trusts are properly structured, the funds in them will not be considered to belong to the beneficiary in determining his or her own Medicaid eligibility. The only drawback to supplemental needs trusts (also called “special needs trusts”) is that after the disabled individual dies, the state must be reimbursed for any Medicaid funds spent on behalf of the disabled person.

To find out whether a trust is the right Medicaid planning strategy for you, talk to your elder law attorney.

Ethical Issues in Representing a Client with Diminished Capacity

October 15, 2019

By Howard S. Krooks, Esq., CELA, CAP, Partner at Elder Law Associates PA
Attorneys often encounter working with clients who have declined physically and/or mentally, which is known in legal parlance as diminished capacity. However, the law assumes that every person has legal capacity unless and until a court has determined otherwise.

The American Bar Association Model Rules of Professional Conduct Rule 1.14 require an attorney when representing a client with diminished capacity to maintain a normal client-lawyer relationship as long as possible. The rules specify that in a “normal” client relationship, the attorney should be able to fully communicate with the client, the attorney should protect the client’s confidential communications and should allow the client to make core decisions about the representation.

Representing a client with diminished capacity puts the attorney into quite a predicament in procuring accurate information regarding the client’s legal problem. Generally, in order to maintain a normal lawyer-client relationship, the attorney must implement a three-stage interview process with the client to determine the legal problem in order to represent the client effectively. The process leads to one of four conclusions, from no evidence of diminished capacity to a lack of capacity and an inability to proceed with the representation.

While there is a difference between clinical capacity and legal capacity, there also are several different legal standards of diminished capacity, from Testamentary Capacity and Donative Capacity to Contractual Capacity. For example, a person may have the capacity to make decisions regarding certain simple things but lack capacity for other more complex matters.

Some believe it is inappropriate for attorneys to make capacity assessments. Yet, attorneys make capacity judgments daily, without formal training, including the initial determination of capacity as to whether clients can enter into the lawyer/client relationship. Throughout the representation, when signs present that capacity is questionable, the attorney must make deliberate efforts to assess capacity. Subsequent assessments of capacity beyond the initial assessment may be needed as capacity is fluid. The bottom line is that capacity assessments by lawyers are unavoidable.

When making an assessment, the attorney must always presume capacity. The attorney may seek guidance from an appropriate diagnostician in determining the extent of a client’s diminished capacity but should obtain client consent before any screening tests are performed. If a person is unable to consent, a legally authorized surrogate could make this decision. If necessary, an attorney can bring protective action if it’s reasonably believed that a client has diminished capacity and is at risk of substantial physical, financial or other harm, and in appropriate cases, seek the appointment of a guardian.

It’s something attorneys face all the time: working with clients who have declined physically and/or mentally. In the elder law world, this is known as diminished capacity. However, there is a big difference between the legal definition of diminished capacity and the clinical definition of diminished capacity.

Much of the clinical testing done on people to determine if diminished capacity exists deals with their inability to perform activities of daily living (ADL). For example, a doctor may test if the person can count backward from 20 to 1, if he or she can remember what year it is or who the president of the United States is, and test physical acuity, such as tying shoes, sitting/standing, walking, etc.

What attorneys need to be concerned with most though is their client’s executive function. Is the client able to make decisions regarding his or her legal matter and/or estate planning, financial future, living arrangements, welfare of their spouse/family, etc.? Consider this scenario: You’re meeting with a client to discuss case strategy and you notice he repeats himself two or three times in the same conversation, forgets what he had for lunch that day but still fully understands who you are, what you’re doing and what the conversation is about, and is fully capable of making decisions about his legal representation. Now, fast forward six months, and you’re having the exact same discussion with the client about changing the legal strategy, yet the client can’t understand what you’re talking about or make the same types of decisions. His decline is definitely noticeable, but he has not been declared legally incapacitated.

On the legal side, the law assumes that every person has legal capacity unless and until a court has determined that he or she lacks capacity. I can’t tell you how many people probably are lacking in capacity in the clinical sense and in the legal sense, but they don’t have guardians appointed for them simply because they haven’t been brought to court. In the eyes of the law, these people are still assumed or presumed to have capacity.

From the attorney’s perspective, you may very well be dealing with someone that has not been adjudicated to lack capacity, but that doesn’t mean they have it, just that it hasn’t been adjudicated. So, what can you do about it?

Rules Pertaining to Lawyers Representing Clients
with Diminished Capacity

The American Bar Association Model Rules of Professional Conduct Rule 1.14* requires an attorney when representing a client with diminished capacity to maintain a normal client-lawyer relationship as long and as far as reasonably possible. The rule recognizes that the attorney’s position is an “unavoidably difficult one.” It specifies that in a “normal” client relationship, the attorney should be able to fully communicate with the client, the attorney should protect the client’s confidential communications and should allow the client to make core decisions about the representation.

Through the “Duty of Communication,” the rule requires an attorney to explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation. The rule recognizes that communications may be adjusted:

  • to the representation;
  • to the comprehension and needs of the client; and
  • even allowing for delaying transmission of information, if the delay is not to serve the lawyer’s own interest or convenience or the interests or convenience of another person.

“Confidentiality” is a core value of the client/lawyer relationship. All information relating to the representation is confidential, including any observations made by the attorney regarding a client’s capacity. Confidentiality remains vital even when the client has diminished capacity. An attorney must maintain client confidentiality even from concerned family members, unless the client has consented to disclosure or if there is a need for protective action (see below).

Representing a client with diminished capacity puts the attorney into quite a predicament in procuring accurate information from the client regarding the client’s legal problem. So, how does the attorney effectively determine the client’s objective and legal needs where the client has diminished capacity?

Generally, in order to maintain a normal lawyer-client relationship, the attorney must implement a three-stage interview process with the client to determine the legal problem in order to represent the client effectively.

The first step the attorney takes is Preliminary Problem Identification, where the lawyer asks the client open-ended questions. The attorney allows the client to relay the legal problem and the relief he or she seeks in a way that is most comfortable for the client.

Next, the lawyer conducts a Chronological Overview, where the lawyer asks the client to relay the legal problem in a systematic successive manner, beginning when the legal problem was first created to the present.

Finally, the attorney determines the possible causes of action or a planning strategy applicable to the client’s case in the Theory Development and Verification step.

The process of determining the legal problem in order to represent the client effectively leads to one of four conclusions:

  1. There is minimal to no evidence of diminished capacity, in which case the representation can proceed.
  2. There are some mild capacity concerns, but they are not substantial, in which case the representation can proceed.
  3. Capacity concerns are more than mild or substantial, and professional consultation or formal assessment of capacity may be merited. In this case, only if the client is determined to have capacity by a professional may the representation proceed.
  4. The capacity to proceed with the requested representation is lacking, in which case the representation may not proceed.

Legal Standards of Diminished Capacity

Earlier, I referred to the difference between clinical capacity and legal capacity. A further analysis is required with respect to legal capacity standards. According to the law, there are several legal standards of diminished capacity:

The first type of capacity is Testamentary Capacity. This means that at the time of executing a will, the testator (client) must have the capacity to know the natural objects of his/her bounty. In other words, the testator must understand the nature and extent of his/her property and interrelate those elements sufficiently to make a disposition of property according to a rational plan. This does not mean the testator must be capable of managing all of his or her affairs day to day. The testator also doesn’t have to have capacity consistently through time (i.e., the testator can sign his or her will at a lucid interval and lack capacity immediately before and/or after). Testamentary capacity is considered the lowest level of capacity a person must have in order to make a valid will.

The next type of capacity is called Donative Capacity, where the testator has the capacity to make gifts. This requires an understanding of the nature and purpose of the gift, including an understanding of the nature and extent of the property to be given, a knowledge of the natural objects of the donor’s bounty, and an understanding of the nature and effect of the gift. Some states require a higher standard for donative capacity than testamentary capacity.

A third type of capacity is Contractual Capacity, where the courts assess the person’s ability to understand the nature and effect of the act and the business being transacted. Contractual capacity is requires a higher level of capacity than testamentary capacity. If the transaction is highly complicated, a higher level of understanding may be needed versus something simple. Minors by definition have no legal capacity to contract and such contracts are generally voidable by the person who lacked capacity.

Other standards of capacity include the capacity to convey real property, the capacity to execute a Durable Power of Attorney and decisional capacity with the respect to a client’s health care.

The Attorney’s Role

What is the attorney looking for in determining if capacity exists? Possible cognitive signs of incapacity include:

  • Short-term memory loss
    • Quickly forgetting information just discussed
    • Repeating the same statements
    • Asking the same questions multiple times
    • Difficulty describing recent events
    • Inability to discuss sports or weather (“small talk”)
  • Communication Problems
    • I brought my “thing” with the papers in it (i.e., notebook)
    • Defers to others excessively (“My wife handles all my appointments; you’d have to ask her.)
    • Difficulty staying on topic
    • Difficulty finding words
  • Comprehension Problems
    • Difficulty repeating back or paraphrasing simple concepts
  • Calculation Problems
    • Difficulty with simple math
    • Adding dollar amounts
    • Inability to line up columns when adding
    • Lack of awareness of financial assets
  • Disorientation
    • Relative to time, space, or location
    • Difficulty navigating attorney’s office building spatially
    • Getting lost driving to the office
    • Knowing what time it is
    • Knowing what year it is
  • Significant Emotional Distress
    • Client appears extremely anxious, tearful, or depressed.
  • Emotional Inappropriateness
    • Extremely wide range of emotions (moving quickly from laughter to tears)
    • Expresses feelings that seem highly inconsistent with what he or she is discussing (e.g., laughter when discussing death)
  • Delusions
    • Belief that neighbor or government is spying on them
    • Belief that food is poisoned for assisted living facility or nursing home residents
  • Hallucinations
    • Hearing voices nobody else can hear
    • Having a conversation with another person who is not there
  • Poor Grooming/Hygiene
    • No brushing of hair
    • No shaving
    • No regular bathing/showering
    • Wearing multiple layers of clothing

There are some who suggest that it is inappropriate for an attorney to make a capacity assessment. Yet, the attorney makes capacity judgments daily, without formal training, including the initial determination of capacity as to whether the client can enter into the lawyer/client relationship. Throughout the representation, when signs present that capacity is questionable, the attorney must make deliberate efforts to assess capacity. Subsequent assessments of capacity beyond the initial assessment may be needed as capacity is fluid. The bottom line is that capacity assessments by lawyers are unavoidable.

The following questions will arise for the lawyer in assessing capacity: When does a lawyer rely on his or her own instincts? When should a lawyer refer the client to another professional for assessment?

Does the Lawyer Have Authority to
Refer a Client for Assessment?

First and foremost, the attorney must always presume capacity. For an assessment to take place, the concerned parties must overcome the presumption by exhibiting evidence of impaired decision-making.

According to the ABA Model Rules of Professional Conduct Rule 1.14, Comment 6, the “lawyer may seek guidance from an appropriate diagnostician” in determining the extent of the client’s diminished capacity.

The lawyer should obtain client consent for any assessments or screening tests performed or for referrals to other professionals for testing. Client consent is crucial. Even clients with diminished capacity may still consent to being screened. If a person is unable to consent, then consider whether there is a legally authorized surrogate who can make this decision, either someone named by the client as Durable Power of Attorney or a Health Care Surrogate.

The Restatement (Third) of the “Law Governing Lawyers,” Comment d. to Section 24, states where practicable and reasonably available, independent professional evaluation of the client’s capacity may be sought. A referral to a physician for a medical exam can help rule out if the client is being overmedicated or taking a toxic combination of medications that could affect capacity. A medical exam can also uncover issues such as a poor diet, vitamin deficiencies, depression, infectious diseases, head trauma, poor eyesight and other treatable conditions.

Diagnosticians may include psychiatrists, psychologists, gerontologists and other health professionals who can perform professional evaluations. A doctor’s letter detailing the capacity assessment can be very helpful, especially in potentially conflicted cases, in helping the attorney determine if a client has capacity.

If an agent under a power of attorney or other legal representative has been appointed for the client, the attorney may look to the representative for decisions on behalf of the client, according to the ABA Model Rules of Professional Conduct Rule 1.14, Comment 4. In addition, the attorney can consult with family members. According to Model Rule 1.14, Comment 3, “The lawyer may wish to have family members or other persons participate in discussions with the lawyer.”

Can the Lawyer Bring Protective Action?

The quick answer to this question is yes.

According to Model Rule 1.14(b): “When the lawyer reasonably believes that the client has diminished capacity, is at risk of substantial physical, financial or other harm unless action is taken, and cannot adequately act in the client’s own interest, the lawyer may take reasonably necessary protective action, including consulting with individuals or entities that have the ability to take action to protect the client and, in appropriate cases, seeking the appointment of a guardian ad litem, conservator, or guardian.”

For an attorney to bring protective action for a client, the requirements include:

  • Existence of diminished capacity;
  • A risk of substantial harm;
  • An inability to act adequately in one’s own interest.

When taking protective action for a client, the lawyer is impliedly authorized to reveal information about the client, but only to the extent reasonably necessary to protect the client’s interests (see Model Rule 1.14(c)).

The Importance of Knowing a Person’s
Habitual Behavior and Values

Consider the following example:

“The doctors wondered, was she uncooperative, cantankerous, and obstinate because her memory and mental function were impaired, or was she a woman who had spent a long lifetime being uncooperative, cantankerous, and obstinate?”

The woman’s daughter was able to say that her mom had always been obstinate, but being uncooperative and cantankerous were new characteristics, more than likely associated with her injury. The main point of this is that a person does not lack capacity merely because he or she does things that other people find disagreeable or difficult to understand.

A great danger in capacity assessment is that a client’s eccentricities, aberrant character traits, or risk-taking will be confused with incapacity.

Lawyers should take the following mitigating factors into account when assessing a client’s capacity: stress, grief, depression, reversible medical conditions, hearing or vision loss and the client’s educational, socio-economic or cultural backgrounds.

When assessing a client’s capacity, the attorney should attempt to optimize capacity by taking a few reasonable steps. The attorney should always attempt to interview the client alone. However, sometimes, family, friends or caretakers can play an important role in providing essential background information relevant to the work to be done. Attorneys should adjust the interview environment to enhance communication. Impaired vision or hearing often produces non-responsive behaviors that may be wrongly interpreted as a lack of mental incapacity. Consider these steps to optimize the assessment interview:

  • Speak slowly and conduct the interview in a quiet, well-lit area.
  • Arrange the furniture in the room, so as to avoid glare from overhead lights or windows.
  • Provide necessary audio or visual amplification to facilitate communication and functioning.
  • Be patient. Some elder clients need extra time to process the information regarding decisions at hand.
  • Meet with the client more than once to acquire a truer sense of the person’s decision-making capacity.
  • Inaccurate sessions due to fatigue may be avoided by scheduling shorter sessions at times when the client tends to be most alert.
  • Home visits are especially conducive to optimal decision-making for many clients.

Once the above steps have been performed, consider a standardized screening or mini-mental status evaluation where the client should respond to the following requests:

  • Delayed recall of three items;
  • Repeating a linguistically difficult phrase;
  • Following a three-step command;
  • Writing a sentence;
  • Copying a two-dimensional figure;
  • Performing serial threes;
  • Spelling the word “world” backwards.

The danger in doing a mini-evaluation like this is that the results provide only a crude global assessment of cognitive functioning. A poor score does not rule out the client’s ability to perform some decision-making tasks. Further evaluations or additional and/or repeated evaluations may be necessary.

You can find out more information about assessing adults with diminished capacity in the following resources: ABA Comm. On L. & Aging & American Psychological Association, Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers (2005); National Academy of Elder Law Attorneys, Aspirational Standards for the Practice of Elder and Special Needs Law with Commentaries, (Second Edition, April 24, 2017).

If you have any questions about diminished capacity, you can visit our website at or email me at


Practical Tip 1:
Capacity is ever changing. It can ebb and flow, so you have to go with the flow. An attorney must be willing to meet the client where and when she or he is most lucid.
Practical Tip 2:
Remember that sometimes our client’s diminished capacity might be more of a reflection of our incompetency in adjusting to the emotional, physical and physiological needs of the client. We have an ethical obligation to presume and enhance a client’s capacity.
Practical Tip 3:
Be aware of distractions that may be around your office that would affect the client’s capacity, such as outside noise, a view of the plaza/sidewalk outside your office or with people walking by, glare, and difficulty for the client to hear or see you.
Practical Tip 4:
Representing clients with diminished capacity requires more time to explain matters fully. A series of shorter, more focused meetings may be necessary.
Practical Tip 5: 
Plan ahead for incapacity by asking permission and receiving consent to speak to others if the client’s capacity comes into question.
Practical Tip 6:
Listen intently to the client and follow up before jumping to conclusions. The attorney must assume capacity, so if the client says something that seems to indicate incapacity, follow up with questions to clarify what the client meant. Do not jump to the conclusion that what they are saying is inappropriate or evidence that the client has become incapacitated.
Practical Tip 7:
Watch for indications from one meeting to the next that the client is declining. The attorney should always be observant of declining hygiene or physical deterioration.
Practical Tip 8:
The attorney should attempt to meet in private with the client. If the client wishes to have other people present, the attorney must talk directly to the client and not be distracted by the other people. Although it is sometimes a challenge, the attorney must insist that it is the client who speaks and not someone else speaking for the client.
Practical Tip 9:
The attorney should sit facing the client so that the client may be able to obtain visual clues as well as the words themselves.
Practical Tip 10:
Respect and dignity: These are key in working with clients with diminished capacity.

Source: Roberta K. Flowers, Maintaining a “Normal Relationship” with Clients with Diminished Capacity, NAELA News, Spring 2015

Howard S. Krooks, Esq., CELA, CAP is a Partner at Elder Law Associates PA, with its headquarters located at 7284 W. Palmetto Park Road, Boca Raton, Florida 33433, and additional locations in Aventura, West Palm Beach and Weston, Florida. He is also Of Counsel at Amoruso & Amoruso LLP in Rye Brook, New York. For more information about Howard S. Krooks or Elder Law Associates PA, please visit

*ABA Model Rules of Professional Conduct Rule 1.14: Client with Diminished Capacity
Client-Lawyer Relationship
(a) When a client’s capacity to make adequately considered decisions in connection with a representation is diminished, whether because of minority, mental impairment or for some other reason, the lawyer shall, as far as reasonably possible, maintain a normal client-lawyer relationship with the client.(b) When the lawyer reasonably believes that the client has diminished capacity, is at risk of substantial physical, financial or other harm unless action is taken and cannot adequately act in the client’s own interest, the lawyer may take reasonably necessary protective action, including consulting with individuals or entities that have the ability to take action to protect the client and, in appropriate cases, seeking the appointment of a guardian ad litem, conservator or guardian.

(c) Information relating to the representation of a client with diminished capacity is protected by Rule 1.6. When taking protective action pursuant to paragraph (b), the lawyer is impliedly authorized under Rule 1.6(a) to reveal information about the client, but only to the extent reasonably necessary to protect the client’s interests.