Are Your Estate Planning Documents Age-Appropriate (Part 2)

Estate planning documents must be appropriate for your age and situation.
Planning ahead may help to protect your home and other assets should one or both of you need care in the future.

In Part 1, we met Joe and Claire, now age 65, and reviewed their need for age-appropriate health care and decision-making documents. We left off with the question, “What planning can Joe and Claire do now to prevent losing everything in the event their health fails?”

The costs of long-term care can be staggering. According to the Genworth 2018 Cost of Care Survey, Florida home health aides can cost, on average, $46,904 per year, based on care provided 44 hours per week and a median hourly rate of $20.50. Nursing home care in Florida, on average, is nearly double that – $97,820 per year for a semi-private room.

What are Joe and Claire’s chances of needing long-term care? According to the Department of Health and Human Services, someone turning 65 today has a 70% chance of needing some type of long-term care services in their remaining years. This means Joe and Claire should be considering how they will pay for that care in the event one or both of them are part of that 70%.

Joe and Claire’s choices include: 1) paying out of their own pocket for care, 2) purchasing long-term care insurance, 3) qualifying for government assistance programs, or 4) any combination of these choices.

By planning early – before there’s a health care crisis – Joe and Claire can take advantage of all three options, yet protect their home and any other cash or assets they wish. This type of asset protection is done using a specially designed irrevocable trust. Only a portion of Joe and Claire’s assets would be transferred to the irrevocable trust, with the remainder either remaining in Joe and Claire’s name, or held in a revocable trust with special provisions for the surviving spouse.

By transferring assets to an irrevocable trust, those assets would not be counted in the future (in most cases, after 5 years) if Joe or Claire needed to qualify for government assistance to help pay for their long-term care. If Joe or Claire is a wartime Veteran, there are additional cash assistance programs available through the Veterans Administration that should be explored as another means to help pay for their care.

To round out the asset protection package, Joe and Claire would also complete their other estate planning documents, such as financial Powers of Attorney, Health Care Advance Directives, and Living Wills. They would also explore purchasing an appropriate long-term care insurance policy in the event one of them needed care sooner than expected.

By planning early, Joe and Claire have the documents and tools in place to protect their home and other assets should one or both of them need care in the future – and there is a 70% chance they will. Joe and Claire have also lessened the emotional and financial stress placed on a family when a health care crisis does happen. They’ve taken care of the heavy lifting with regard to their assets, so their family can just focus on what really matters – making sure they have the best care possible.

Other articles you may find interesting:

Time to Take Over A Parent’s Finances?

Not Your Grandfather’s Senior Community

 

 

Are Your Estate Planning Documents Age-Appropriate? (Part 1)

Estate planning documents must be appropriate for your age and situation.
Estate planning documents must be appropriate for your age and situation.

Twenty years ago, Joe and Claire, age 45 at the time, went on their first vacation without their kids since they were married. They had no estate planning documents in place, and had to scramble quickly to get a simple Will and Power of Attorney to make sure their kids would be taken care of should something happen to them. They owned a home with a mortgage, and had very little in savings.

The Will named a guardian for their minor children, and named a trustee to hold their children’s money in trust until they reached age 21. The Durable Power of Attorney only addressed basic financial issues, naming an agent to act in their place (paying bills, writing checks for the kids’ various activities) in the event they were unable to.

Joe and Claire did not prepare a Living Will, or any type of estate planning document that named another person to make healthcare decisions for them if needed. Their main focus was their children, and making sure the mortgage and other bills were paid if something happened to them while they were away.

Joe and Claire arrived home from their trip perfectly healthy, and the documents they signed sat in a safe deposit box for the next 20 years. Now age 65, Joe and Claire are nearing retirement and have accumulated a nice “nest egg” and just paid off their home.

However, they recently had a friend suffer a near-fatal heart attack and it was a sharp reminder to them of how precious life is. The topic of their Will from 20 years ago came up, and they both agreed it was time for an update.

Joe and Claire now need estate planning documents that address their current age and status – near retirement with substantial savings. The Durable Power of Attorney that worked for their purposes 20 years ago needs a major makeover. Joe and Claire need to consider who will step in and make financials decisions on all of their matters if they are unable to act due to incapacity.

Incapacity can be the result of a disease, like Alzheimer’s, or it could come from a more sudden health event, like a heart attack or stroke. As Joe and Claire grow older, the possibility of a debilitating health event increases. They have more assets than they did 20 years ago, including a number of online accounts that would need to be managed. A generic form is usually not enough to cover the complex issues that arise as we get older, and as we acquire more possessions.

This increasing possibility of a health crisis also sheds light on the need to have their medical wishes properly documented through a health care directive. What type of life-sustaining measures should be undertaken for them? Who will make health care decisions if they are unable to? The natural choice is to choose the other spouse as agent, but what if the other spouse is unable or unwilling to act?

If Joe and Claire haven’t designated their agent through proper legal estate planning documents, then a court may be left to decide for them – an expensive and sometimes lengthy process that can be very stressful on the family.

Another issue that is important to discuss is what type of care should be provided if Joe or Claire need it? Does Joe wish to stay home and receive care there? If so, who should provide that care? Do both of them want to transition to independent living at some point when keeping up a home and yard becomes too much? If the conversation isn’t held while Joe and Claire are healthy, then other family members and friends are left to guess what they would have wanted.

As shown above, age-appropriate estate planning documents that address health care and financial decision-making are critical. The other critical planning concern is what will happen to all of Joe and Claire’s possessions if one or both of them get sick and need substantial care on a long-term basis?

In our next article: What steps can Joe and Claire take to prevent losing everything in the event their health fails?

Other articles you may find interesting:

Are No-Contest Clauses Valid In Florida?

Do I Need to Update My Estate Plan if I Relocate?

Having the “Someday” Talk with Parents

Daughter talking with her parent
Don’t wait too long to have these important conversations with your parents.

The cause of sleepless nights for many baby boomers now comes from worrying about their aging parents instead of their young children. As parents age, it becomes more important to talk with them about a number of “someday” issues, advises Kanawha Metro in the article “Preparing for someday.” As their lives move into the elder years, your discussions will need to address housing, finances, and end-of-life wishes.

Where do your parents want to spend their later years? It may be that they want to move to an active retirement community not far from where they live now, or they may want a complete change of scenery, perhaps in a warmer climate.

One family made arrangements for their mother to take a tour of a nearby senior-living community after their father passed. By showing their mother the senior-living community, they made an unknown, slightly intimidating thing into a familiar and attractive possibility. Because she saw the facility with no pressure, just a tour and lunch, she knew what kind of options it presented. The building was clean and pretty, and the staff was friendly. Therefore, it was a positive experience. She was able to picture herself living there.

Money becomes an issue as parents age. If the person who always handled the family finances passes away, often the surviving spouse is left trying to figure out what has been done for the last five decades. A professional can help, especially if they have had a long-standing relationship.

However, when illness or an injury takes the surviving spouse out of the picture, even for a little while, things can get out of control fast. It only takes a few weeks of not being able to write checks or manage finances to demonstrate the wisdom of having children or a trusted person named with a power of attorney to be able to pay bills and manage the household.

As parents age and their health becomes fragile, they need help with doctor appointments. Having a child or trusted adult go with them to speak up on their behalf, or to explain any confusing matters, is very important.

Having an estate plan in place is another part of the business of aging that needs to be accomplished. It may be helpful to go with your parents to meet with an estate planning attorney to create documents that include a Last Will and Testament, Durable Power of Attorney and advanced health care directive. Without these documents, executing their estate or helping them if they become incapacitated will be more complex, and more costly.

Eliminate a scavenger hunt by making sure that at least two siblings know where the originals of these documents are.

One of the more difficult conversations has to do with end-of-life and funeral arrangements. Where do your parents want to be buried, or do they want to be cremated? What should be done with their remains? What do they want done with their personal belongings? Are there certain items that they want to be given to certain members of the family, or other people they care for?

Finally, who do they want to care for their pets? If there is a family member who says they will take their parent’s pet, can that person be trusted to follow through? There needs to be a Plan A, Plan B, and Plan C so that the beloved pet can be assured a long and comfortable life after their owner has passed.

Yes, these are difficult conversations. However, not having them can lead to far more difficult issues. Knowing what your loved ones wish to happen, and making it enforceable with an estate plan, provides everyone in the family with peace of mind.

Reference: Kanawha Metro (May 29, 2019) “Preparing for someday”

Other articles you may find interesting:

Widowed? What Happens Next?

Pet Trust FAQs: For the Love of Fluffy

Cognitive Decline Doesn’t Have to Happen

Cognitive decline isn't a mandatory part of getting older.
Cognitive decline isn’t a mandatory part of getting older. In many cases, it can be avoided.

For many decades, people assumed cognitive decline was inevitable with advanced age. Medical experts said people stopped making new brain cells as adults, so when we lose cells through injury or deterioration, there are no “spare parts” to replace them. As a result, it seemed logical that cognitive impairment was only a matter of time.

The nagging doubt about this theory was the fact we all know people who remain mentally sharp well into their nineties and even past the age of 100. As it turns out, you were not the only one who might have wondered about the accuracy of the long-held assumption of inevitable age-related cognitive decline. A recent study reveals we can grow new brain cells well past retirement age.

Columbia University and the New York State Psychiatric Institute worked together on a study designed to explore this issue. They performed autopsies soon after death on the brains of 28 people ranging in age from 14 to 79. The subjects had all been healthy prior to sudden death. None of them had cognitive decline during their lives.

The researchers examined the hippocampus area of the brain. The hippocampus processes learning and memory and grows new brain cells to replace those we lose through daily attrition. In particular, the scientists looked at the neurons (nerve cells) and blood vessels within the hippocampus.

Although the brains of the older subjects in the study did not form as many new blood cells and their new neurons might not have been able to make as many connections as the brains of the younger subjects, the study revealed a startling fact. The brains of healthy older people continue making new brain cells, just as well as the brains of younger healthy people.

There was no difference in the volume of new brain cells between the younger and older brains. Since the hippocampus does not stop making new brain cells as long as you stay healthy, the researchers concluded many seniors do not suffer cognitive or emotional decline, despite the common assumption to the contrary.

Take-Aways from the Study Findings

Seniors do not get the respect they deserve in American society. One excuse people get for being dismissive of their elders, is the widely held belief that old people become mentally feeble. This research challenges this idea and shows that healthy older people can be just as sharp as people in their youth.

The common belief about seniors having cognitive decline can be a self-fulfilling prophecy. If a person believes cognitive decline is an automatic part of aging, the person might not try to prevent this result. We all know people who suddenly start to act older after they hit a milestone birthday, as if living up to their expectations for a person of that age.

Now that we know there is no such thing as automatic cognitive decline because of age, we can do something about it. You can stay sharp as long as you stay healthy. Keep learning and reading. Study a foreign language. Learn to play a musical instrument. Do word puzzles. Stay socially active and involved in your community. Take a walk every day to get regular physical exercise. Eat nutritious food.

And above all, avoid things that damage brain cells, particularly the hippocampus. Misusing drugs, even prescription ones, drinking too much alcohol and smoking can all damage the hippocampus and cause cognitive decline. If the hippocampus isn’t healthy, you won’t be able to continue making new brain cells as you age.

References:

AARP. “Older Adult Brains Can Grow Thousands of New Cells.” (accessed May 30, 2019) https://www.aarp.org/health/conditions-treatments/info-2018/older-brains-grow-new-cells.html

Other articles that may interest you:

The Importance of Funding Your Trust

A Solo 401(k) Works for Self-Employed

Not Your Grandfather’s Senior Community

Active senior community
Seniors are seeking more active retirement communities.

One 78-year-old woman wanted to compete in a triathlon, so she headed over to the pool at her retirement community and joined a training team. Another 86-year-old woman logs 10 miles twice a week on one of the same retirement community’s spin bikes. That’s what a senior living community that also offers assisted living and skilled nursing care looks like today, reports considerable.com in the article “The rise of ‘cool’ senior living communities.”

Other communities have been created on or near college campuses, where residents can take classes, attend school concerts or sports games, hang out with students and get care if and when they need it. There are also the upscale high-rises that feel more like resorts or healthcare spas.

Active adult communities for those 55+ are transforming themselves into cool, desirable places to live a busy lifestyle. There are now two of Jimmy Buffett’s “Latitude Margaritaville” communities in Florida and another in South Carolina.

Today’s seniors don’t want a bland community, and their children don’t want to see their parents in one. Senior providers know that if they want to succeed, they must stand out from the competition. They’ve got their eye on the 76 million baby boomers who are prospective residents. They know that these prospects are radically redefining aging, just as they have every other stage of life.

An even bigger challenge — most people want to age in their own homes and not move at all.

More senior living communities are also offering opportunities for residents to interact with people of all ages. One community has programs for all ages, a Saturday pop-up café, and more than 40 organizations meet at the center regularly. The community has positioned itself as a gathering place for all members, young and old, to combat isolation and bring people together.

Some retirement communities are built on properties that are mixed-use with the same purpose of not isolating seniors. One community in Alabama will have a center for well-being, open to residents and the public, with physicians, nutritionists, wellness coaches, chiropractors and alternative therapies from salt rooms to infrared saunas. A co-working area and research space for partnerships between healthcare providers, local medical schools and universities and biotech companies will be offered.

For those with seawater in their veins, there is a cruise ship that has been retrofitted with more than 600 condo living units. For wine enthusiasts, one company in California’s Sonoma wine country is partnering with a Zen center to build a facility that will offer meditation classes, workshops and retreats, as well as independent and assisted living and memory care.

No matter what your interests are, chances are there’s a new, cool retirement community with your interests and lifestyle in mind.

Reference: considerable.com (May 24, 2019)“The rise of ‘cool’ senior living communities”

Other articles you may find interesting:

Do I Need to Update My Estate Plan if I Relocate?

Naming a Child as Successor Trustee?

ABLE Accounts: No More Medicaid Recovery

ABLE accounts are a simple way for disabled families to save.
ABLE accounts are a simple way for families with disabled loved ones to save, and now they’re even better in Florida.

ABLE account holders received a boon recently, but it seems to have gone unnoticed.

Florida Governor DeSantis signed 38 bills the other day, but the only one widely reported had to do with emergency personnel being given permission by the government to exercise a certain Constitutional right when entering dangerous situations. But one of those many bills was a game-changer for families with disabled loved ones.

ABLE accounts have been around for a few years. They provide people with disabilities a simple, tax-advantaged way to save without affecting government benefits like Supplemental Security Income (SSI) and Medicaid. But there was one huge drawback – when the account holder died, Medicaid could take what was left in the account, up to the amount of Medicaid benefits the person received.

Governor DeSantis eliminated that provision in Florida, effective June 30, 2019. Now, when the account holder dies, anything left in the account goes to his or her chosen beneficiaries.

These accounts do have some limitations, and a special needs trust is sometimes a better solution. But, in many cases, an ABLE account and a special needs trust work together beautifully. If you or someone in your family has a qualifying disability that occurred before age 26, talk to your estate planning attorney, elder law attorney, or financial advisor to see whether an ABLE account is a good choice for you.

Other articles you may find interesting:

ABLE Accounts for Special Needs Planning

Financial Planning when a Family Member has Special Needs

Time to Take Over A Parent’s Finances?

Determining whether it's time to take over a parent's finances can be tricky.
Determining whether it’s time to take over a parent’s finances can be tricky.

When is it time to take over a parent’s finances? The realization that parents can no longer be entrusted with their own finances often comes on the heels of the decision to take away the car. This is a very difficult issue because the parents of Baby Boomer kids are the “Greatest Generation.” As a general rule, they were and are extremely private about finances. The steps to take are outlined in this article, “Here’s how to know when it’s time to take control of your parent’s finances,” from Considerable.

The tricky part is figuring out the timing. If it is done too soon, you’ll be battling with your parents. Conversely, if it is done too late, major financial damage may be done.

Keep your eyes open for signs that your parents are not able to maintain their responsibilities. That includes changes in their behavior, misplacing things and not being able to locate them, or making too many trips to the bank for reasons that they can’t or won’t explain. Other clues that it may be time to take over a parent’s finances: purchasing things they never bought before, or paperwork piling up on a desk that used to be tidy and organized.

One adult daughter didn’t realize that her mother was being scammed until Mom had sent more than $100,000 to scammers. Elderly financial abuse is pervasive, and the Senate Special Committee on Aging estimates that elderly Americans lose some $3 billion annually to financial scammers – including family members!

One elderly woman, suffering from dementia, forgot to pay her long-term care insurance premiums and lost the coverage. The company had sent five notices, but she didn’t understand the importance of those notices. (Many insurance companies now request a back-up contact person who can be notified if a payment is missed).

Even children who have close relationships with their parents can miss the signs. Often, the children don’t step in until the parent has a health crisis, and, at that point it becomes clear that things have not been right for a while. If one parent is overwhelmed by taking care of his or her spouse, an otherwise organized parent may become prone to making mistakes.

The earlier children can become involved, the better. Children should ideally become involved with their parents while they are still healthy and able to communicate the necessary information about their financial lives. If the family waits until illness strikes or dementia becomes apparent, there may be significant and irreversible damage done to the parent’s finances. Sadly, even with well-drafted estate planning documents, a guardianship court may have to become involved if the parent is not willing to let the children help.

An elder law attorney will be able to help the family as they transition the parents away from being in charge of their own finances. It’s not always an easy process but sometimes it’s necessary.

Reference: Considerable (April 18, 2019) “Here’s how to know when it’s time to take control of your parent’s finances”

Other articles you may find interesting:

Using a Power of Attorney for a Parent

Financial Advisors Try to Prevent Financial Exploitation

Medicaid and Estate Planning Documents

medicaid and estate planning
Medicaid for payment of long-term care is becoming a factor in many estate plans.

The conversation that you have with an estate planning attorney when you’re in your thirties – with a new house, young children, and many years ahead of you – is different than the one you’ll have when you are much older, maybe just before you retire. The estate planning attorney will know that you are about to enter a time in your life when the legal documents you prepare are more likely to be used, says the article “Learn about legal documents and Medicaid” from the Houston Chronicle.

It should be noted that everyone needs an estate plan at any time of life so they can state their wishes for how assets are distributed and also name a person who will speak on their behalf in the event of incapacity because of an illness or injury.

So an estate plan should include a Durable Power of Attorney, which names someone you chose to serve as your agent to transact business and handle your financial matters. There should also be a Declaration of Preneed Guardian, in the event of later incapacity, and a HIPAA medical authorization document. In some instances, a designation of remains is prepared in order to name an individual who will be the appointed agent to care for the body at the time of death.

However, there’s another reason why you’ll need to meet with an attorney later in life. As we get older, the need to address long term care becomes more important. Medicaid eligibility may be part of that plan. Making the right decisions now could have a big impact on the quality of your retirement and your medical care.

If you haven’t updated your Will or your Powers of Attorney, it would be wise to do so now. You’ll need a document to clearly authorize your agent to deal with assets. If your documents are out of date, or named agents have predeceased you, it may not be effective, which could lead to problems for you and your heirs.

The document may also need to include a broad gifting power for your named agent, so assets can be transferred out of the estate. If this detail is overlooked, your agent may not be able to protect your assets.

This is also the time when you may want to take steps to protect your children upon your death or upon the death of the second parent. If your goal is to arrange your assets to be eligible for Medicaid coverage, this planning should be done well in advance. Many states pursue recovery of assets when a person has received Medicaid benefits, so it needs to be done correctly.

Your attorney will be able to work with you and your family to address your specific situation. It may mean that your estate plan will include trusts, or that certain assets will need to be retitled. Meet with an estate planning attorney who is familiar with your state’s laws. And don’t procrastinate.

Reference: The Houston Chronicle (April 19, 2019) “Learn about legal documents and Medicaid”

Other articles you may find interesting:

A Health Care Surrogate’s Powers

Yes, You Should Have a Will