IT'S ABOUT PROTECTING WHAT YOU HAVE-
NOT THE ECONOMY OR HEALTH CARE
I am hoping to get your attention by paraphrasing a well-worn phrase-"It's the economy, stupid"-often heard during the 1992 presidential election and since then.
What I have taken from the ongoing debate about the economy and health care that is going on nationally is not what kind of insurance coverage Congress is going to make available to every American or what type of cost reductions in care costs can be obtained, but rather, that it's all about what kind of protection can be afforded to you and me. Yes, it's all about protection.
The good news is - at least they are talking about the economy and health care protection.
The bad news is -- there is nothing you or I can control about what Congress will do about the economy and health care protection.
There is more good news, however, and that is that we can create our own type of protection.
The Threats
The three biggest threats to most Americans are the effects of:
- Taxes;
- Inflation; and
- Long-Term Care.
The Solutions
Taxes are going to continue to go up and, therefore, careful tax planning in both the estate and income tax areas will be essential.
Inflation is relatively tame right now, with the exception of two major areas: health care costs, as I mentioned above, and the escalating costs of college. Hopefully, whatever Congress does will help us contain the costs of health care. With respect to college costs, taking advantage of tax incentives such as 529 plans can help reduce the effect of such costs somewhat.
With regard to Long-Term Care, the most important thing that we can do to rein in the costs of Long-Term Care is to engage in preplanning. Preplanning will deal with: 1) repositioning your estate plan and assets, and 2) looking to place the right kind of insurance or financial product with your family in order to plan for Long-Term Care when there is still enough time to plan.
However, there are crisis situations where Long-Term Care Insurance or other insurance is not going to be available and, therefore, crisis planning is necessary, which requires more aggressive and creative solutions.
Please remember that, with regard to long-term care planning, the question is not what happens when you die, but rather the question is what happens if you don't die and suffer a long period of disability.
There is Hope
With all of the fallout in the stock market and real estate markets, there is still an oasis of safety and protection that can be obtained by taking control of your long-term care matters.
Don't let the assets that took you a lifetime to accumulate be lost in a moment due to a health emergency.
Remember, Medicare will cover acute care matters such as surgeries and hospitalizations, but Medicare will not cover long-term care for the effects of Dementia, Alzheimer's, Parkinson's and long-term debilitating diseases.
To Do
Contact us to set an appointment about what protective measures we can create for you in order to provide your family not only with as much financial security as possible, but also with the gift of peace of mind. We invite you to bring your Financial Advisor and CPA with you.
To all that come in for an appointment, we will give a free copy of our new CD "Consumer's Guide to the Basics of Long-Term Care Planning" and also our new booklet "Consumer's Guide to Planning for Long-Term Care".
ATTENTION VETERANS: Qualifying Veterans May Receive Up to $23,396 per year.
These dollar amounts reflect 2009 maximum Veterans Administration Pension rates for qualifying claimant with a spouse. The actual amount awarded may vary according to the claimant's circumstances. Widowed Spouses may receive up to $12,681 per year. Veterans married to Veterans may receive up to $30,408 per year. There may be additional benefits for dependent or disabled children.
"Secret Dollars": VA Benefits for Long-Term Care Revealed
One of the Veteran Administration's best-kept secrets, which is an excellent potential source of funds for long-term care (either at home or in an assisted living facility) are veteran's benefits for a non-service connected disability. Most VA benefits and pensions are based on a disability which was incurred during a veteran's wartime service. There is another benefit, however - a pension program - available for individuals who are disabled due to the issues of old age, such as Alzheimer's, Parkinson's, multiple sclerosis, and other physical disabilities. For those veterans and widows(ers) who are eligible, these benefits can be a blessing for the disabled individual who is not yet ready for a nursing home.
There is a specific portion of the pension program which is of particular importance. This program is "Aid and Attendance" (A and A) and is available to a veteran who is not only disabled, but had the additional requirement of needing the aid and attendance of another person in order to avoid the hazards of his or her daily environment (in other words, someone needs to help you to prepare meals, to bathe, to dress and otherwise take care of yourself).
Under this program, a veteran can receive a maximum of $1,949.00 per month in benefits and a widow or widower can receive up to $1,056.00 as a maximum benefit for A and A for the year 2009. The applicant must be determined to be "permanently and totally disabled". The applicant does not need to be helpless - he/she need only show that he/she is in need of aid and attendance on a regular basis. Someone who is housebound or is in an assisted living facility and over the age of 65 is presumed by the Veterans Administration to be in need of aid and attendance.
This particular program has limitations related to the income and assets that are held by the applicant. However, in computing the income of the applicant, certain items can be deducted. Specifically, unreimbursed medical expenses (UMEs) paid by an individual may be used to reduce the applicant's income. Home attendants or aides are an allowable medical expense deduction, as long as that attendant is providing some medical or nursing services for the disabled person. The cost of an assisted living facility, and even part or all of the cost of an independent living facility, can also be an allowable medical deduction to reduce your gross income to a much lower net countable income that may qualify you for veteran's benefits.
Simplified Example: Bill Robert is a 66 year old veteran and, due to his health needs, has caregivers coming to his home for several hours each day. His income is $1800/month and he is paying caregivers $3300/month. Rather than deplete his saving of $45,000, he applies for a service pension through the VA. The VA considers the $3500/month he is paying to his caregivers unreimbursed medical expenses and "subtracts" the amount from his income. In other words, when calculating his pension, the VA considers income to be negative $1500. He applies for benefits and is eligible for $1500/month to help him with his bills!
To file a claim for this benefit, it is wise to seek the involvement of a trained veteran's service officer. A Veteran's Service Officer is critical to the filing of an application with the local VA regional office. It is also important to seek the guidance of an experienced elder law attorney who is familiar with estate planning, disability, Medicaid and veterans' benefits. An attorney skilled in elder law can provide a veteran and the veteran's family with appropriate pre-filing consultations to determine the appropriate steps that must be taken to be able to determine if it would be right to apply for this VA benefit.
Next Step: In our office what happens is the spouse or family of the Veteran requests information on the Aid and Attendance Pension benefit. My paralegal, using a structured intake questionnaire, screens the prospect to determine if they are likely to be eligible for benefits without any legal planning.
If the family does not qualify for benefits due to having too many assets, we counsel our clients on options and strategies to qualify for the benefit
Living Wills
vs.
Powers of Attorney for Health Care
Over the last several years, it has been difficult to avoid hearing about the Terri Schiavo case. Though many of us would prefer to avoid it, a recent article in the newspaper said that the Schiavo case has increased awareness regarding the importance of living wills. It has, no doubt, increased awareness --- but will it really motivate people to actually sign living wills? Are you going to sign a living will now?
A living will is an expression of your wishes regarding end-of-life decisions. If you don't want to be kept alive artificially, should you ever become terminally ill and unconscious with no chance of recovery (as decided by two doctors), you can sign a living will making your wishes clear. For a doctor to withhold or withdraw artificial life sustaining treatment, the law says there has to be clear and convincing evidence that those are the patient's wishes. The best way to accomplish this, of course, is to put your wishes in writing by signing a living will. As we know, Terri Schiavo didn't do this. Her husband says that, before Terri became ill, they had discussed these issues and Terri had made it clear she wouldn't have wanted to be kept alive in her condition. Her parents disagreed. Terri was kept alive for 15 years.
While a living will is clear and convincing evidence of a person's wishes, it is possible that, from a practical standpoint in a true end-of-life situation, the document's strength might be diminished if parents, children, or spouses claim the living will does not reflect their loved one's wishes. This could also happen if close family members simply don't agree with each other as to whether or not the living will reflects their loved one's wishes. You can imagine the concerns a doctor is going to have when a patient's living will says she doesn't want to be kept alive artificially, but the patient's daughter is there pleading with the doctor to keep her mother alive---saying that she knows her mother would have wanted to live. You must discuss your wishes with your loved ones.
While an Illinois living will leaves instructions regarding the withdrawal of death-delaying procedures, it does not extend to the withdrawal or withholding of food and water if that deprivation, rather than an existing terminal condition, would be the cause of death. Further, it does not address any other health care matters that may arise during your life. Thus, a living will serves a very limited purpose.
There is an alternative. In Illinois, you can sign an Illinois Statutory Short Form Power of Attorney for Health Care ("HCPOA"), in which you (the "principal") appoint an "agent" (and one or more successor agents) to make crucial health care decisions in the event that you are unable to do for yourself. You are given three options dealing with the issue of life-sustaining treatment. You can choose one of these options or you can insert a direction of your own choosing. For example, you can authorize your agent to withdraw food and water, even if that deprivation would be the cause of death, if this is your wish. In this respect, your HCPOA will serve as your living will.
In your HCPOA, you can also indicate your wishes with respect to anatomical gifts (i.e., organ donations), as well as autopsies and the disposition of remains. Your agent is also authorized to make any other health care decisions on your behalf, not just with respect to life-sustaining treatment. You can also direct that your agent be treated as you would be with respect to disclosure of your medical records. For these reasons, a HCPOA will serve you in a much broader sense than would a living will.
The Illinois Power of Attorney Act states that, as long as the agent named in the HCPOA is available, the HCPOA renders any living will executed by the principal inoperative. This does not mean that it is inappropriate to execute both a health care power of attorney and a living will. If the agent under the health care power fails or refuses to act, the existence of a living will may ensure that the individual's wishes still will be honored. Where an individual also would want artificial nutrition and hydration withdrawn in appropriate circumstances, some commentators suggest that the living will could be modified to reflect this wish. Even if not effective under the Living Will Act, the provision will provide written evidence of the individual's intent.
For all of the reasons set forth above, we recommend that our client's rely on the health care power of attorney in most situations.
Some of you reading this are elder care advocates. You work with the elderly and their families every day. Because these end of life issues are on so many peoples' minds, we all have the opportunity to educate the individuals we serve on these issues and empower them with the knowledge they need to make informed decisions. It is important for everyone to realize that advance directives, such as a health care power of attorney and living will (to some extent) can be tailored to suit their wishes. For example, some may not want their lives prolonged in any way should they be terminally ill and unconscious, while others may want all means possible used to keep them alive. Still others may wish to decline all life prolonging treatment with the exception of food and water.
Regardless of your decision, it is critical that you discuss your wishes with your family members and loved ones.
The key is to act now. You may want to begin by contacting an elder law attorney to discuss questions you have about living wills and health care powers of attorney. Once you've been educated about your options, you can make the decision that's right for you. And once your decision is made and you have acted on it, you can take the next step of discussing your wishes with your family. Good elder law attorneys, who take a holistic approach to serving their clients, can help you with this part of the process as well.
July 2009
1. Keeping Your Beneficiary Designations Current. According to Consumer Reports "Money Adviser," it is very important to keep your beneficiary designations up-to-date on your financial accounts. By doing so, you will make sure your life savings doesn't end up in the wrong hands, like and ex-spouse or estranged sibling or distributed under court supervision.
Do's and Don'ts of Beneficiary Designation Forms according to Consumer Reports:
- Don't leave beneficiary forms blank or name your estate. If you do your account will be included in your probate estate and distributed per the instructions of your will. If you do not have a will then the court will decide who gets your money and this requires probate in court.
- Do list a primary and a contingent beneficiary. By listing a contingent beneficiary you are covered if the primary beneficiary dies before you do. It is often suggested that you name your spouse as the primary beneficiary and then a contingent beneficiary which can be a person or trust. Be careful naming a trust or you can blow certain tax benefits.
- Don't name a minor as a beneficiary. Until they reach the age of 18 children cannot open up bank accounts or invest an inheritance they might receive by themselves and will need a guardian or custodian to control funds. A better approach would be to name a trust as beneficiary for the minor children. With a trust you can stipulate an age at which the children will receive their money. You can also delay distribution to Junior longer.
- Do review you choices on older accounts and policies. It is important that you contact your broker, insurance agent or bank and ask who is listed on your accounts as beneficiaries, especially since some companies have gone under or have been acquired by others. When this happens, occasionally beneficiary documents are shredded or lost in transition. If you need to re-do or update the beneficiary designation forms you might be able to obtain new ones from the company's website or you can call and request them. Your estate planner also might be able to obtain them for you. (Keep a copy for your own records!)
2. Low-Cost Insurance to Help Ill Elderly Remain at Home. Senator Edward Kennedy released an expansive health care plan that includes a national long-term care insurance program. The program would offer basic help for the elderly and disabled. Under this proposed plan, Americans would pay roughly a $65 premium per month (which is far less than the typical cost of private long-term care insurance), and after contributing for at least 5 years, participants would be eligible for a benefit of not less than $50 a day. This might seem like a modest amount when compared to the average cost of a nursing home, but this amount would pay for a range of services that would allow an individual to stay at home longer.
3. Guardian May Conduct Medicaid Planning. A New York court allowed a guardian to conduct Medicaid planning on behalf of his great aunt, but the court requires that the money be placed into a trust for his aunt's personal needs. Some Illinois courts also try to provide the same opportunity for planning.
4. Prepaid Burial...A Rip Off? A 2007 AARP survey of 1,087 Americans 50 and older found that 23 percent of them had made pre-payments on funerals, burials or both. However, there have been a number of funeral homes throughout the country who are not honoring the pre-paid burial plans purchased by customers. One of the common complaints is the casket bait and switch. This is when a customer asks for a specific casket and after they pass that casket is no longer available and the funeral home offers a lesser-quality model. A second complaint is when a customer tries to cancel their policies. Most funeral homes do not give refunds and many states do not require a funeral home to make full refunds. A third complaint is when customers try to transfer their policies to another funeral home whether it is in the same state or a new state after the customer has moved. But, the biggest complaint is outright fraud. Most states require that sellers deposit 70 to 100 percent of the customer's money into trust accounts and the money should remain untouched until it is needed to pay for the service. But some funeral homes do not deposit the required amount and if they do they do not keep it there until the money needs to be used or sometimes they withdraw the money if the funeral home is strapped for cash. Some states allow pre-paid funerals to be funded by insurance policies rather than trusts and those plans are regulated separately under insurance laws. Because of the lack of federal oversight that leaves regulation of the pre-paid policies up to the states, therefore depending on state law purchasers of pre-paid policies may have little recourse when their pre-paid policies disappear.
Before you buy...
• Think it over. It might not be necessary for you to purchase a pre-paid burial plans in-most cases. Instead you could deposit money into a separate interest bearing account at the local bank and on your death the named beneficiary could use the money to pay for your funeral expenses. Just make sure you choose a beneficiary that can be trusted.
• Bring a magnifying glass. Make sure you read the fine print carefully and make sure you know what is covered. If there are uncovered expenses, like flowers, clergy honoraria, death certificates, etc. make a list and inform your survivors so they know what still has to be paid.
• Ask about refunds. Be certain the contract can be transferred to another funeral home or that your money can be refunded to you if you move or change your mind. You might also want to find out if there is a penalty for canceling the policy or missing a payment.
• Follow the money. Know where the money is being invested. If it is being used to purchase an insurance policy, make sure the insurance company is highly rated, if the payments are going to go to a trust account, find out the bank or institution that will be holding the funds.
• Plan for change. Find out what happens if your circumstances change. What if something you requested is no longer available? What if the funeral home changes ownership? What if your family decides on a simpler, less expensive funeral?
• Review your finances. If you are trying to qualify for Medicaid you can put some of your money into an "irrevocable" pre-need funeral plan as a way of spending down your assets.
• Talk to an elder law attorney. This is the most important. Have your elder law attorney review any pre-need contract before you sign.
(Some of the contents of "Prepaid Burial...A Rip Off" are taken from a well written illuminating article "R.I.P. Off" by Barry Yeoman found in the AARP Magazine for January and February 2008.)
Retirement: Have You Prepared?
When planning for retirement it is best that people of different disciplines and trainings work at the table together. CPAs, financial advisors and elder law attorneys need to put their various disciplines and expertise together to suggest advantages and disadvantages of various options. One area that needs to be investigated is the area dealing with pensions and social security. Before determining which pension options to select not only should there be investment considerations but also determination of what the exposure is for long-term care costs. An analysis needs to be made of what benefits are available for needs such as housing and long-term care. An examination should be made of Medicaid, Medicare, VA Benefit, what is offered through the Community Care Program through the Illinois Department of Aging and a number of other resources. Once a determination is made as to what benefits might be available the next analysis should determine how to shift the risk of long-term care planning to the extent possible. This is extremely important when there is a spouse who will continue to live in the community. The protection of assets for community spouse can be achieved through the usage of asset transfers, trusts, long-term care insurance and annuities.
When considering retirement this is an excellent time to examine your place on the "Elder Care Journey" and make a determination as to whether you have the appropriate estate plan in place. The Wills, Trusts and Powers of Attorney that you executed 20 years ago when the children were small may no longer serve their purpose. Rather, these documents may now work against you by transferring assets from a healthy spouse to an ill spouse while the ill spouse it trying to qualify for needs based governmental benefits. Proper health care and financial powers of attorney need to be obtained to make sure there is someone designated to be able to act in your stead. The health care power gives another person the ability to access information about your medical needs and consent to various treatments. A financial power of attorney allows the agent to pay bills, transfer assets and engage in long-term care planning if that authorization is built into the financial power of attorney.
A review of retirement assets should be made in conjunction with the review of the estate planning documents. Consistency about beneficiary designations needs to be created.
Finally, when we look at retirement planning, the paradigm in which your life situation is analyzed needs to change. Traditionally, attorneys have asked questions such as "What happens if you die?" The new question that needs to be asked is "What happens if you don't die, but become ill for a long period of time?"
Preparing for retirement should be something that we embrace and work hard for so that we can ensure that the golden years are protected. Again, assembling a good team of advisors will enhance your chances in obtaining the right result.
Power of Attorney versus Guardianship
Quite often we discover that clients coming to our office do not know the difference between a power of attorney and guardianship. I would like to take the opportunity to explain it to you in very basic terms.
What is a Power of Attorney? A power of attorney is a legal document where one person, the principal, gives legal authority to another person, the agent, to perform certain acts on the principal's behalf.
There are financial powers of attorney and then there are powers of attorney related to health care.
Your power of attorney can be made very broad in its scope. In many instances people will rely on the Illinois Statutory Short Form Power of Attorney for Property, and also the Illinois Statutory Power of Attorney for Health Care. Contrary to their names these power of attorneys are not that short. Nevertheless, quite often depending on the needs of our clients we even expand these documents to include certain provisions that the standard short form does not provide.
It may be a good idea in many circumstances to use the statutory forms because these are easily recognized by health care providers and financial institutions as recognizable forms of power of attorney. You do not have to use the statutory form and can create your own power of attorney as long as it meets the standards of the statute. However, once you depart from the statutory forms you start running the risk that the document that you created may no longer be recognizable or accepted by health care providers or financial institutions.
You also have the ability to strike out and reduce the powers that are listed in the statutory forms. Quite often clients don't want to give all of the powers that the statutory form automatically provides.
Finally, with regard to powers of attorney you can make them immediate powers of attorney or what we call springing powers of attorney. An immediate power of attorney takes effect the day you sign it and can remain in effect for as long as you wish. A springing power may only come into effect on the triggering of an event such as a doctors determination of your disability. You could also allow powers of attorney to remain in effect for the remainder of your life often referred to as a durable power of attorney or you can make a power of attorney last for only a short period of time, for example two weeks in order to allow an agent to close a real estate transaction for you. For estate planning and long-term care planning a durable power of attorney is obviously more effective.
What is Guardianship? Guardianship is a court established legal relationship whereby the Guardianship Court appoints a person, the guardian who is determined to be the guardian to make personal and financial decisions for someone who cannot make these decisions on their own (the ward).
In Illinois we have several forms of guardianship but the most common is considered to be guardianship of the person for personal decisions regarding personal care and living arrangements. The second type of guardianship is guardianship of the estate, wherein the guardian has control over the assets of the ward.
Quite often a family member or interested person may initiate the guardianship proceeding by filing a Petition in the Guardianship Court in the county where the ward resides. The opinion of a doctor is necessary to establish the disability of the individual. If the ward is properly served and examined by a guardian ad litem (a court appointed lawyer acting as the eyes and ears of the judge) then the court may appoint a guardian to make decisions in either the personal area or the financial area or both. The power that a guardian has is closely scrutinized by the court and before a guardian can take any actions other than routine day to day matters, a court order must be obtained. A guardian is also required to report at least annually to the court on the status of the wards personal condition and the status of the wards income and assets.
Conclusion
For Long-Term Care Planning purposes we like to have powers of attorney in place so guardianship can be avoided. Guardianship will have substantial costs associated with it. However, in many cases either because the power of attorney is inadequate or non-existent, guardianship is often obtained in order to further advance the benefits to the ward.
This is another example of the need for proper planning so that you have the opportunity to avoid a costly guardianship proceeding and instead rely on yourself appointed agent under powers of attorney to act the way you instruct them to act in event of your disability.
Pending Medicaid Law Changes Pose Challenges to
Nursing Homes and Residents
In prior issues we wrote about the new pending Medicaid law changes as they relate to gifts or asset transfers. Illinois has not yet adopted the new law but may have to.
You may recall that under the old law a gift created a period of ineligibility from the date of the transfer. For instance, prior to February 8, 2006 a $30,000 gift in Illinois would create a 5 month penalty from the date the gift was made if the nursing home monthly cost is, for example, $6,000 a month. So, if the gift was made 12 months ago, the penalty would have already expired.
Under the new law, for gifts made after February 8, 2006 the penalty period will not begin until the person is in a nursing home and already spent down to $2,000 in Illinois. Only at that time will the penalties start.
In other words, if the same $30,000 gift was made after February 8 and then the person spent his or her assets down to $2,000 in Illinois, only at that time would the penalty period begin tolling. In that case, the gifted funds would have to then be used for the cost of care to get through the penalty period. But what if the funds are not longer available...for instance if they were paid for college tuition or given to charity or to an individual who simply no longer has them? What will happen then?
This is a major problem and one that nursing homes will have to face in the coming months. Prior to this law minor asset transfers would not cause major problems for the nursing homes since the penalties would have expired by the time the applicant was spent down. Under the new law, however, every transaction will have to be scrutinized. Even small gifts or transfers will cause penalties which won't even being to expire until the person is otherwise spent down.
It has been common practice to have the nursing home help the potential Medicaid applicant apply in the past. This was probably not a huge risk under the previous laws. The new laws, however, make this very risky from possibly a legal and cash flow perspective. That's because it will now be much more important to verify exactly what has been spent and given away because the law now has no "grace period" for asset transfers.
An example will suffice to show where the problem lies.
Let's take the example with Mrs. Jones who is a resident of Shady Acres Nursing Home in Cook County Illinois. Let's say that a few months from now she is applying for Medicaid since she has now spent down. But in March of 2010, assuming the new law was passed; let's say she has made a gift to her granddaughter for tuition at Rockhurst College. Assume that the amount of the tuition payment was $6,000. Under the old law that would have meant there would be a penalty of 1 month (i.e. the $6,000 gift divided by $6,000, assuming 6,000 is the average cost of a nursing home in Illinois.) Under the old law there would have been a 1 month penalty from the date of the transfer. Under the new laws, however, the penalty won't start until her assets are spent down to $2,000.
Now if the social worker at the nursing home fills out the application and doesn't realize how the new law will affect these situations, then the application will be filed in anticipation of the receipt of Medicaid benefits. Imagine the surprise of the nursing home administrator when he or she later finds out (usually some 30 to 45 days after filing the application) that the application was correctly denied according the new rules now in effect.
What will the nursing home do in this case? Well their recourse is to file a request for a hardship waiver. The new rule provides for this. The problem is that in the past the granting of hardship waivers have been few and far between. What's more...the hardship is for the resident in that he or she will be denied needed care if the application is approved. The hardship is not, however, for the nursing home to help their cash flow.
You can imagine the issue this will cause in the coming months when nursing homes begin to deal with the documentation required for their residents who may or may not have the ability to reconstruct their financial records to the extent called for by the new law. In addition, the granting of hardship waivers is a process that has been very tedious and will certainly serve to slow down the approval of the Medicaid application. All of these reasons have led some commentators to call the new law "The Nursing Home Bankruptcy Act of 2006."
While we're not sure it's that dire...we are sure that it will cause challenges for nursing homes and their residents. That's also why what were once simple Medicaid applications should no longer be viewed that way. The services of an elder law attorney who thoroughly understands the new rules regarding the Medicaid changes as well as how to apply for hardship waivers is recommended.
"Change You Had Better Believe In"
"The only constant is change, inevitable change, continuing change that is the dominant factor in society today. No sensible decision can be made any longer without taking into account not only the world as it is but the world as it will be."
No, this was not President Obama stating this, but rather this quote is attributed to Isaac Asimov who died in 1992. This quote illustrates that as we live longer, as our family changes and our needs change, as the law changes, we too must take action to change.
All of our clients are now living in the present and the present has storm clouds on the horizon. This requires our clients to think again. The documents that you created for estate planning purposes when you were 65 may no longer serve the same purpose and worse yet could disadvantageous to you as you move on to possible long-term care.
SAMPLE CASE STUDY:
A woman came into our office and her documents were created roughly 10 years ago by another attorney. Her husband has recently died. The couple back in 1999 created two revocable living trusts, one for each of them. This was a good plan at the time and made perfect sense. The goal at the time was to shelter their estate from estate taxes and avoid probate. At that time, their combined estate was $1 million but the estate tax laws only allowed them to shelter $600,000. So instead of paying estate taxes, they prepared a trust designed to allow each them to shelter $600,000 so that no estate taxes will be paid.
This was marvelous planning at that time, but now...
10 years later, the woman's husband is deceased, and the surviving widow is now 9 years older and has chronic health issues. Also, there have been tremendous changes in the estate tax laws since she originally did her documents. Each U.S. citizen can now shelter $3.5 million in assets before any estate taxes are due. So the same $1 million in assets are sheltered from estate taxes but over half of those assets (approximately $500,000) are in her husband's trust. The husband's trust restricts how wife can use these assets! She cannot change the beneficiaries and the trust not only does not serve her purpose but is now becoming a problem as we look at planning for long term care.
The woman's Powers of Attorney are no longer adequate. They do not contain all of the tools that we routinely insert in the Powers of Attorney in order to make them effective for any situation involving Long Term Care.
The Question for the Immediate Future:
Have you planned for the issues and costs that will arise in connection with long-term care, either in your own home or at a skilled facility?
Please recall that the greatest threat to most Americans is the cost on long-term convalescent care. Therefore, we urge you to get an update of your estate plan and take into consideration elder law issues and long-term care issues. The Medicaid laws have changed in many states and will shortly be changing in Illinois. It is best to obtain all of the tools necessary through an updated estate plan, long-term care plan and updated Power of Attorney while you are healthy and can deal with these issues.
Our firm wants you to have the most updated and well written documents available so that you and your family can tackle every situation that will arise as more changes come. And come they will! Never doubt it!
This is a Positive Message
I hope you will take this communication as a positive message. In this update we are trying to inform you and the professionals that serve you that there are many steps that can be taken to protect you and your family as well as your assets. If we provide for change we can create a better future for yourselves with more control and thereby provide you with greater peace of mind.
You have our best wishes!
Think You Don't Need Long Term Care Planning?
Think Again!!
1. Alzheimer's Projections. Recently during a Senate Special Committee on Aging hearing, a couple of prominent politicians noted that there is no single effort that would do more to lower the cost of entitlement than preventing the onset of Alzheimer's disease. They noted that Alzheimer's will cost Medicare and Medicaid a projected $19 trillion between the years 2010 and 2050. It was noted that a five year delay of onset would save approximately $8.5 trillion over that same period. It was further noted that the human pain and financial burden of Alzheimer's is so great and the potential breakthroughs in science are so encouraging, that a Manhattan type project approach to Alzheimer's is justified.
2. More Coming. A respected report says that 5.3 million people in the U.S. have Alzheimer's. An estimated 5.3 million Americans have Alzheimer's and each patient on average costs Medicare three times more than patients without the disease.
3. Kin Using Elders' Funds in Downturn. Recent studies show that family members are often inappropriately using an elder's funds in economic down turn. It has been noted recently by some long term care ombudsman that children don't have the legal authority to make some decisions for parents. Worse yet, some of the decisions that are made by children on behalf of their parents are purely economically motivated. One case was noted where a nursing home resident was blocked from receiving antibiotics because her daughter cited a "do not resuscitate" clause in her mother's Living Will. The suspicion is that the daughter was trying to hasten her inheritance. Seniors are advised to be cautious because sometimes the power of attorney given to a family member can give an unscrupulous person license to exploit. This is not a reason not to have a power of attorney but rather should signal that caution and counseling are required in providing such power.
4. Impact of Long Term Care. A recent report indicates that nearly two-thirds of U.S. households are at risk of being unable to maintain their standards of living due to long term care costs.
5. Avoid a Crisis...Talk to Mom & Dad. It is recommended that children sit down and have a heart to heart talk with mom and dad as their capabilities for maintaining independence in their household begin to dwindle. Joint accounts are dangerous. Adding a loved one to a bank account can affect Medicaid planning, as well as expose your account to the loved one's creditors. When a person applies for Medicaid for long term care coverage, the state looks at the applicant's assets to see if the applicant qualifies for assistance. If your name is on a joint account and you enter a nursing home, the state will assume the assets in the account belong to you unless you can prove that you did not contribute to the account. Furthermore, if you are a joint owner of a bank account and you or the other owner transfers assets out of the account, this can be considered an improper transfer of assets for Medicaid purposes. Another problem with joint accounts is that the account can become vulnerable to the joint account owner's creditors. Finally, be sure you can trust your joint account holder because he or she will have full access to the account. In our opinion, there are better ways to conduct estate planning and planning for disability. The power of attorney is a better approach and will provide your agent access under power of attorney to your finances in case of your disability. If you are trying to avoid probate, a trust may be better than a joint tenancy account as well. You need to discuss these issues with an elder law attorney.
6. Ways To Pay For Long Term Care. Remember the possibilities of covering the cost of long term care. The most common ways are:
- Paying out of pocket
- Carrying long term care insurance
- Qualifying for Medicaid by obtaining legal guidance and a legal spend down of your assets. Strict compliance with state laws is necessary.
- Lastly, getting a reverse mortgage.
Note: for Veterans who qualify for nursing home care in a Vet Nursing Home, the closest facility of which we are aware is in Manteno, Illinois.
7. Is It Time to Update Estate Plans? Because of the uncertainty regarding estate plans and laws that may shift treatment, formula clauses in Wills and Trusts can become problematic. The current Federal Estate Tax exemption amount of $3,500,000 creates this situation, but there are a number of solutions to this problem. One is to put the full exemption amount into a family trust while making sure that your spouse is a major beneficiary of that trust and can receive distributions liberally and for broad purposes.
8. Watch Your CDs. Not all Certificates of Deposit are the same. Recently, the SEC accused a former Texas financier of fraud. The allegations are that the scheme revolved, in large part, around the sale of suspicious high yielding CDs. The CDs were not insured by the FDIC, resulting in a lot of people being unable to protect their life savings. Some CDs are covered by the FDIC, which currently offers insurance of up to $250,000 per person, per bank. Additional coverage can be obtained depending on how you hold the CD.
9. What you Need to Know About Estate Planning. You need to have a Will and maybe a Trust. You also need either a standard, enhanced, or comprehensive Power of Attorney for Property for Long Term Care Planning. You need to have Living Wills and advanced medical directives to avoid a situation like Terry Schiavo. Special Needs Trusts are often essential when there are family members who are physically or mentally challenged. The estate tax right now is as favorable as it has been in a long while. Each U.S. citizen is entitled to up to $3.5 million of assets before they have to pay estate tax. For a couple, that adds up to $7 million, if planned properly. Please remember that the federal exemption amount under current law is scheduled to go back to $1 million in 2011.
10. Housing Bubble Impacts Elderly. Because of the recent housing slump, many elderly are not obtaining the needed support and care which they would be afforded by moving into retirement communities or assisted living facilities. Many are effectively stranded in their own homes. Without the ability to sell their houses or condominiums, many cannot afford to buy into retirement homes that require substantial down payments just to move in. So they are taking themselves off of waiting lists and staying at home. The inability to sell their home or condo is isolating a lot of the elderly. At present count, there are 4.2 million unsold homes in the United States, but it is unknown how many of those are occupied by people 65 years or older.
