Estate Planning

By:  Susan M. Graham, Certified Elder Law Attorney, Senior Edge Legal, Boise, Idaho

A new year is the time to take a deep breath, and make a fresh start.  There were probably things you did or did not do in 2012 that in hindsight you wish you had done.  That’s just life repeating itself.  No matter, you still have a chance to improve your retirement future.

The Wall Street Journal recently identified “Five Big Retirement Mistakes”[1]

         1.  Not paying for financial guidance.  Most people pay for an accountant to do their taxes and an attorney to write their estate planning documents, but they often expect free advice on how to invest their assets.   The financial people have the ability to plug your assets, income, expenses and other variables into computer programs that will help you project your financial future.

         2.   Investing in something you don’t understand.  If you can’t explain how your investments work to someone else, then don’t buy it.  

         3.  Supporting your adult children.  If you co-sign on a student loan, on a house mortgage or on a car loan that means your child does not have the financial ability to get the funds.  You are on the hook when the child does not pay.  Last month, one of my clients told me they co-signed on a son’s house and now the house is in foreclosure.  My clients will be responsible to make up the difference between the house sale and the mortgage that is much larger than the house is worth today.  What does that mean for them?  They will have to pay over $50,000, a huge part of the nest egg they set aside for their retirement. 

         4.   Lowballing eldercare costs.  Most people ignore the reality of aging.  Look around you.  Older people more often than not need help with daily living activities.  Expecting family or friends or the government to provide this assistance is an unrealistic fantasy.  The cost of home care is approximately $25 per hour or $200 per day for an 8-hour shift. 

         5.    Underestimating how much you will need.  This issue goes back to the first point, talk to a professional financial person to help you get a more accurate picture of what it will cost to live the lifestyle you want for the rest of your life no matter how long that will be.  You may live longer than you anticipate.   My father-in-law planned to be dead at age 80 and was irritated at the surprise birthday party I arranged.  I took him aside and asked why he was so grumpy when I had set up such a grand party.  His answer:  “I don’t not want to be 80.”  I told him “get over it”--you are stuck.  My Cousin Kathie never dreamed that she would be 99 when she died after living in a nursing home the last 4 years of her life, paying over $8,000 per month for her care. 

         6.  What can you do to create a more secure retirement?  Follow the steps outlined above.  In addition, make certain your estate planning documents are up to date.  Are your agents still available to help out when you need them to step up if you are unable to care for yourself or when you die?  Do your planning papers reflect your current wishes or have things changed and you need to adjust your documents? 

         The security of your future is in your hands.  Start the process by talking with a professional: a financial person, your accountant or lawyer to cover all the bases.

         Happy New Year!

by Susan M. Graham, CELA, Senior Edge Legal, Boise, Idaho

         There are two phases of legal planning for caregiver:  how to protect the independence, assets and family  of the person needing care in the good days and during the time of needing help due to mental or physical incapacity.   The best planning provides maximum personal independence, protection of assets and protection of other family members.

         The following are some legal techniques that help accomplish planning goals.

Phase One:  The Good Days (or mostly good days).  This phase assumes that the person creating a plan is competent.  That means they are mentally and physically able to contract.

         •  Sign a Financial Power of Attorney.  This gives the persons listed the right to do modest financial business on behalf of the person who signs the documents.

         •  Sign a Health Power of Attorney and Living Will.  This document provides for the persons who can make health decisions with the treating health professionals, and also allows for an election of the type of care to be provided when death is near. 

         •  Sign a Last Will and Testament.  This document will indicate who is in charge of the finances after death and who is to receive the decedent’s property.

         •  If a caregiver spouse or the person being cared for is a Veteran, contact the Veteran’s administration or an attorney accredited with the Veteran’s Administration to see what benefits are available to help pay for caregivers.

         If one of the planning goals includes protecting assets for the person being cared for, as well as their spouse or the family, there are more complex legal plans that can help.

                  •  Have the individual requiring care sign a revocable trust, providing for others to manage finances and make health decisions.  This trust also covers who is to receive that individual’s assets when they die.

                  •  For a married person, often the healthy, caregiver spouse, can sign a Last Will and Testament, that provides if the healthy spouse dies first, the deceased spouse’s share of the family assets will be set aside for the benefit of the ill spouse, in a manner that provides continued support but will not interfere with the ability to receive government benefits.

                 •  Single and married people can protect substantial assets if they have the ability to pay their expenses for at least five years. 

Phase Two:  The Bad Days – Incompetency.  At this time the individual being cared for lacks the mental or physical capacity to contract and, therefore, cannot sign legal documents.

         •  It may be possible for the incompetent person’s agents on the financial power of attorney and health power of attorney and the Trustee of a revocable trust to work with those documents without the need for a court order.

         •  If there is no financial power of attorney and no health power of attorney, it may be necessary to file papers in the local Court to ask that someone be appointed as Conservator and Guardian for the incapacited person in order to give someone the legal right to make financial and health decisions for the vulnerable person.  The Conservator makes financial decisions, and the Guardian makes the health and housing decisions.  The Conservator and Guardian are often the same person.  It is necessary to use an attorney to help with this process.

         •  The caregiver needs to consider how to pay for the care required. 

By Susan M. Graham, CELA, Senior Edge Legal, Boise, Idaho

The U.S. Government has no money!   Can seniors expect help from the government to pay their long term care expenses? 

Who needs long term care?

People over age 65 have a 50-70% chance of needing care before they die.

What does it cost?

         At home:  $20 per hour to $15,000/month for 24-hour care

         Assisted Living:  $3,500 to $5,000 per month

         Skilled Nursing Care (Nursing Home) $6,000 to $10,000 per month

         Crabby/Difficult Senior:    $16,000 to $18,000 per month

What are the six ways to pay for care?

         Family and friends provide the care for free.

         Take money out of your pocket

          Long Term Care Insurance

          Medicare

          Veteran - Non Service Connected Disability (Aid and Attendance)

          Medicaid

How do each of the six ways work?

1. Family and friends provide the care for free. 

When a spouse becomes a caregiver, it increases the likelihood that they will die before the spouse who is being cared for.   If children are the caregivers, it ruins their lives.  They stop working early, lose out on wages and benefits, and have less time to spend with their own family and friends.  If they are paid without a written contract, this can create problems later if the person needing care wants to qualify for government benefits.

         2.       Pay “Out of Pocket,”  

Pay the expenses for you or your spouse from your funds until you run out of money.

         3.       Long-Term Care (LTC) Insurance.

You purchase LTC insurance.  You decide how much coverage you want in terms of a daily rate to pay for your care and for how long.  To qualify for and purchase LTC insurance, you need to be healthy and have the funds to pay the premiums.  Why buy LTC insurance?  You get the most flexibility to choose the location for your care and how the funds will be spent.  The worry about our government’s ability to pay for your care and everyone else’s care is lessened.

         4.       Medicare.

Medicare is a Federal HEALTH insurance program for people 65 and over.  

There is a short-term residential care component for Medicare if you qualify.   

                  You must be admitted to a hospital for 3 or more days. 

                  When you are discharged to a rehabilitative facility, you must participate in the rehabilitative activities and be improving.

                  If these two events occur, then Medicare will pay 100% for the first 20 days of rehabilitative care.  The bills I have seen for the first 20-day stay range from $6,000 to $30,000.

                  If you continue to be in rehab, Medicare will pay part and you or your supplemental health insurance will pay part of the bills for the next 80 days.

                  This benefit is being taken away with the hospital stating that a person is not “admitted” but rather is in the hospital for “observation.”  That means the patient is ineligible for Medicare coverage for subsequent skilled nursing care in a facility.

                  Also, this benefit is not available if the patient is not “improving” or participating in the rehabilitative activities.

         The result:  Seniors must pay for their post-acute care out of pocket or forego the treatment.

          5.  Veteran’s Non-Service Connected Disability (Aid and Attendance).

The Veterans program will help pay between $1,094 to $2,631 per month for long-term care in your home or a facility. 

How can this benefit be accessed?

         You or your spouse must be

                  Age 65 or older

                  Served 90 days on active duty

                  One day during wartime [1]

                  Received a discharge that is not dishonorable

                  Meet the income test

                  Meet the asset test

            6.  Medicaid (a loan program).

Medicaid is a State  and Federal program that provides for long-term residential care to people who are aged, blind or disabled.  Each state is responsible for administering the Medicaid prorgram in its state.  I will address the program for the “aged.”  Aged means someone is age 65 or older.

What is this benefit?  If a person qualifies, the benefit will pay for the cost of care in assisted living or a skilled nursing home facility that participates in the Medicaid program.  There are some funds to help pay for care at home, but frequently the payment is not enough to provide full care for an individual in their own home.

What does it take to qualify for Medicaid?

The applicant must be blind, disabled (using a social security definition) or age 65 or older.

                 The applicant must have a medical need.

 The applicant must pass an income test.  If they fail this test, it is often possible to take some steps to meet this requirement.

 The applicant has to meet an asset test. This test is complex and cannot be covered in this short article.

Once the Medicaid recipient (and their spouse) dies, the State is entitled to be reimbursed for the funds they paid out on behalf of the Medicaid recipient.

Summary:  What is the best way to plan for long-term care, when it is more likely than not to happen?

1. Consider LTC insurance, even if you think you can self-insure.

2. If it is too expensive or too late to get LTC insurance, contact an attorney who is familiar with Medicare, Medicaid and VA benefits to explore other alternatives.   Asset protection is only possible with the right tools.  The sooner planning is done, the more flexibility the individual and their family have for lifestyle choices and the greater the ability to protect a lifetime of earnings. 

3. A Family Legacy Trust may fit to preserve assets, and help pay for care.

4. Act now.  Don’t wait for a crisis, because then it may be too late to make choices that are best for the family.   Under the current law, to have the most flexibility in planning, it needs to start five years before a need arises.

This information is intended to be helpful and general and not intended as legal advice.   These rules for Medicare, VA and Medicaid benefits are complex and change frequently.

By Susan M. Graham, Certified Elder Law Attorney, Senior Edge Legal, Boise, Idaho

         Who knows where you keep your important papers?  In an emergency situation, valuable time could be wasted tracking down important legal papers.  Make it a point to tell your children, successor trustee or personal representative where they can find your original documents.  If you store those documents in a safe deposit box, or a safe at home, make certain they have the ability to get into the box or safe. 

         We frequently receive calls from our clients’ family members who want to know where they can find these documents, and they need them “now” because there is a family crisis.   There are legal limitations that tie our hands so often we cannot provide our copies to the family. 

         You do not have to tell anyone about the contents of the papers, just let them know how they can access them in an emergency.

By Susan M. Graham, Certified Elder Law Attorney, Senior Edge Legal, Boise, Idaho

I walk my dogs every day.  We cruise the neighborhood.  Of course making it safe, but also noticing any changes or new things.  For the last month I have noticed piles of dirt around the wooden telephone poles.  It seemed odd to me.  Yesterday, I saw a young man digging around a pole.  I asked him why and he told me the city decided it is much cheaper to dig the dirt from around the wooden poles, treat the wood with something to stop any rot or bug infestation, wrap it in a special cloth and then refill the dirt.  This saves them loads of money because it is cheaper to maintain the poles, than it is to replace them.  Of course, that makes sense.  We have limited resources, and it is cheaper to take care of what we have, rather than let it fall apart and only notice when it fails.

How does this relate to you?  If you have gone to the trouble and effort, and paid for, an estate plan to help protect you and those you care about if you are ill or die, why not make certain it still works.  When the telephone poles were installed they were the best, but as time goes by things change.  The City still wants them to be the best and can help that happen with maintenance.  You, too, need to maintain your plan so that it works when you need it   How can you do this?  Set up a review appointment with your estate planning attorney to review your existing plan to determine if it covers your current circumstances and what you want to happen when you become ill or die.  If not, it is easy to make changes now before there is a problem.  The City is saving money and headaches.  So can you.

By Susan M. Graham, Certified Elder Attorney, Senior Edge Legal, Boise, Idaho

Whitney Houston’s Last Will and Testament is available on the internet and everyone can see the terms of her estate plan.  Her estate goes to her daughter and is managed until she is 30, with some assets going to her earlier.   Do you want your affairs made public?  There were similar news reports about the Last Will and Testament for Jackie Kennedy Onassis and Elvis Presley.   Every word of their Wills became public.

How does this happen?  When someone dies with a “Last Will and Testament,” their Estate must be probated in the local court.  This means the Will is filed with the court along with a petition requesting that the terms of the Will be followed and that someone nominated in the Will be appointed by the court to wind up the affairs of the deceased person.  All of these documents filed with the court become a public record and are available for anyone to view.  They just need to go to the courthouse and pay for copies.  

Maybe this is not a problem for some people.  But many of us would not be happy if the details of our personal lives were available for strangers to review.  It is none of their business.

If this is a concern of yours, you may want to consult with your lawyer about how to create an estate plan that keeps your affairs private and still accomplishes your planning goals.

By Susan M. Graham, Certified Elder Law Attorney, Senior Edge Legal, Boise, Idaho 

I talked to a wife this week who has been a caregiver for her demented husband for years.  Recently he has taken to getting up in the night and using firewood stored by the fireplace to start fires on the hearth and in the firebox!  Fortunately, his wife noticed both times and put the fires out.  She is grateful for these miracles but sees no need to change how they live.  

Her desire is to continue to care for and keep him at home with no help.   This is a dangerous plan for both of them.

Fortunately, their children and doctor have taken notice and are working to make changes that will result in a safer environment for each of them with plenty of help.

Hope is not a plan.  That approach is living in a fantasyland unrelated to real world events associated with ageing.

By Susan M. Graham, Certified Elder Law Attorney, Senior Edge Legal, Boise, Idaho

Marie died and $400,000, which was all of her estate, went to her son, Chris.  Chris was married to Jane and they had three children.  Chris died two years later giving all of his assets, including those he inherited from his mother, to his wife.  After a few years, Jane married Tim, a widower with one child.  Jane and Tim did not have a prenuptial agreement, and they just decided to put all the assets each of them owned in joint names.  Jane died a year after marrying and everything she owned went to Tim.  When Tim died everything went to his child.  Nothing went to Chris and Jane’s children. 

Do you want your son’s widow to give your son’s inheritance to her new husband rather than your grandchildren?  If not, you may want an “Inheritance Trust.”

Some other names for this type of trust are “dynasty,” “heritage,” or “legacy” trusts.

This trust provides powerful protection for the individuals who inherit from you.  How does an inheritance trust work?  Upon your death, the monies a person inherits from you will be deposited directly into this trust rather than being given to them out right.   The funds that are placed in this trust will be protected from divorces, creditors, lawsuits, and bankruptcy.

Using an inheritance trust, we will rewrite the story about Chris.   When Marie died, $400,000 went to Chris. This time Marie has created an irrevocable inheritance trust naming Chris as the Trustee and the sole beneficiary during his lifetime.  When Chris dies, whatever remains in this Trust will go to his three children.  Marie dies, and Chris puts the $400,000 in this inheritance trust.  Chris decides how the funds will be invested, and he has the right to withdraw the money under certain circumstances. When Chris dies, those funds will go to his children and stay in Marie’s family. This trust provides extraordinary protection for Chris because the money will be protected should certain life tragedies occur, such as a serious illness, financial reversal or divorce.