Worried about a Spouse Needing Nursing Home Care?

Worried about a Spouse Needing Nursing Home Care?
couple bored in retirement

The six-figure cost of nursing home care is worrisome for those who are married, when a spouse has to go to a nursing home. In the example above, Tom has had some major health issues in the past year and Louise is no longer able to care for him at home.

In this case, the couple live in Pennsylvania, where nursing home care statewide is $126,420 a year ($342.58 per day). The state has a Medical Assistance program that is a joint state-federal program that will pay for nursing home care, if a person meets both the medical and financial criteria.

Tom has met one of the major Medical Assistance threshold requirements, because he is “nursing home facility clinically eligible,” which means that a doctor has certified that due to illness, injury or disability, Tom requires the level of care and services that can only be provided in a nursing home.

What will happen to their assets?

In 1988, Congress passed the Medicare Catastrophic Coverage Act, which created a process of allocating income and resources between a spouse who needs to live in an institutional setting and the spouse who can continue to remain in a community setting.

Tom and Louise’s resources are divided into two buckets: one that is exempt and the second that is non-exempt.

The family home, care, and cost of a pre-paid funeral, if that has been done, are exempt or non-countable assets.

Everything else, whether they own it together or individually, is considered non-exempt. In Pennsylvania, Louise’s IRA is the exception. However, that is not the same in every state.

Louise is entitled to keep one half of what they own, with a maximum of $126,420, as of January 1, 2019. This is her “community spouse resource allowance.”

Anything else they own, is used to pay for Tom’s nursing home care or purchase a very select group of “exempt” assets, like a replacement car or the cost of a prepaid burial.

They would have needed to give away their resources, at least five years preceding an application for Medical Assistance. If they have given money away in an attempt to preserve some of their assets, that would have changed the timeline for Tom’s being eligible for care.

Louise needs income to live on, so that she is not impoverished. She is entitled to a monthly minimum maintenance needs allowance of $2,058 and a maximum needs allowance of $3,150.50. These numbers are federally adjusted and based on inflation.

The numbers that must be examined for Louise’s income are her Social Security benefits, Tom’s Social Security benefits, any pension either of the two may have and any other income sources. She can keep her income, as long as she does not go over a certain level.

Sounds scary? It is. This is why it is so important to do advance planning for nursing home care, and have an ongoing working relationship with an attorney with experience in estate planning and elder law. There are changes over time to address the changing circumstances that life and aging present.

Reference: Pittsburgh Post-Gazette (April 29, 2019) “Married and concerned about one of you going to a nursing home?”

How to Pay for Assisted Living or a Nursing Home

Senior living can be costly, but with a little creativity, you can find multiple options to help you pay for the Assisted Living or a Nursing Home expense. You might also not need as much money as you think as Senior housing developments include some costs that you have to pay for out of pocket, while you still live in your own home.

For example, if you pay $100 a month to have your grass cut, you will most likely not have this item as a separate expense at the facility. If your monthly bill at the senior housing development includes some meals, that service will replace some of your current costs as well. Nonetheless, you will need to figure out how to pay for assisted living or a nursing home. Here are some options:

Current Income

Some people have enough money from their current income to pay for living in a senior community. For example, a person who receives $2,000 a month from Social Security, $4,000 a month from an annuity, and $1,000 a month in interest, dividends and investment income can use current income to pay for a facility that charges up to $7,000 a month.

Savings

For many people, current income is insufficient to cover the entire cost of a senior housing development. Let’s say that your current income is $3,000 a month and the assisted living center charges $5,000 a month. If you have enough savings, you can supplement your income to make up the difference. At $2,000 a month, you will have to spend $24,000 a year of your savings to live in senior housing.

Proceeds from Sale of the Home

Quite a few people plan to sell the large family home and downsize into a senior apartment or other development, when they retire. Proceeds from the sale of your home can go a long way toward helping to pay for senior housing, depending on the amount of equity in your house.

Reverse Mortgage

Reverse mortgages are not for everyone. There have been shocking scandals, in which unscrupulous lenders heartlessly took the entire nest eggs of older adults who did not understand all the terms and conditions of reverse mortgages. Be sure to check with multiple sources, like your state’s attorney general office and a trusted financial advisor who has nothing to gain from you getting a reverse mortgage, before agreeing to one of these arrangements. Read every word of all the documents and do not sign until you understand every detail. But these tools can be incredibly effective for the right situation and with the right advisor.

Bridge Loan

If you find yourself in urgent need of assisted living, you might get a bridge loan to cover the costs of senior housing until your house sells. Compare the interest rate and terms of a bridge loan to a home equity line of credit.

Military Benefits

If you or your spouse served in the military, you might be eligible for Veterans Administration (VA) programs like Aid and Attendance. This program can help pay for nursing home care, assisted living, in-home care and memory care.

Long-term Care Insurance

Although fewer than three percent of Americans buy long-term care insurance, those who do can use the benefits to pay for assisted living, memory care, or a nursing home, depending on the coverage. Be sure to read the terms of the policy with great care, particularly about how long you can receive benefits and for what services.

Medicaid

After you spend down most of your assets, you might qualify for Medicaid. No organization pays for more people to live in senior housing than Medicaid does. Every state has a different Medicaid program, and each one has its own eligibility requirements. It is a good idea to talk with an elder law attorney in your area about how your state’s regulations differ from the general law of this article. But of course, before spending it all down, research your options to be sure that you are making informed decisions to pay for Assisted Living or a Nursing Home.

If you are assisting a loved one with their planning, be sure to research all options.

References:

A Place for Mom. “How to Finance.” (accessed April 14, 2019) https://www.aplaceformom.com/planning-and-advice/articles/financial-assistance

Surviving Spouse Needs An Estate Plan

When one spouse dies after meticulously titling assets to pass through joint tenancy to the surviving spouse, estate planning attorneys flinch. There are occasions when everything works smoothly, but they are the exception. As this article from the Santa Cruz Sentinel warns “After husband’s death, wife needs to create revocable trust.” Actually, she needs more than a revocable trust: she needs an estate plan.

Most of the assets in the plan created by her husband, in this case, did pass to the wife outside of probate. However, there are a number of details that remain. She needs to obtain date-of-death values for any non-IRA securities the couple owned, and she should also have their home’s value determined, so that a new cost basis for the house will be established. She also needs an appointment with an estate planning attorney to create a will and an estate plan.

If the surviving spouse dies without a will, her children will inherit the estate in equal shares by intestate succession. However, if any of her children pass before she does, the estate could be distributed to her grandchildren. If they are of legal age, there is no control over how the assets will be managed.  Making matters worse, if a child or grandchild is disabled and receiving government benefits, an inheritance could make them ineligible for Social Security and Medicaid benefits, unless the inheritance is held within a Special Needs Trust.

Another reason for an estate plan: a will details exactly how assets are distributed, from the set of pearls that great aunt Sarah has kept in the family for decades to the family home. A durable power of attorney is also part of an estate plan, which lets a named family member or trusted friend make financial decisions on your behalf, if you become incapacitated. An estate plan also includes an advance health care directive, so a loved one can make medical decisions on your behalf if you are not able.

These are the basics of an estate plan. They protect loved ones from having to go to court to obtain the power to make decisions on your behalf, as well as protect your family from outsiders making claims on your estate.

A revocable trust is one way to avoid probate. An estate planning attorney will be able to evaluate your own unique situation and determine what the best type of trust would be for your situation, or if you even need a trust.

You may be thinking of putting your home, most families’ biggest asset, into joint tenancy with your children. What if one or more of your children have a divorce, lawsuit or bankruptcy? This will jeopardize your control of your home. A revocable trust will allow your assets to remain in your control.

The last piece in this estate is the IRA. If you are the surviving spouse, you’ll want to roll over your spouse’s IRA into your own. Make sure to update the beneficiary designation. If you neglect this step and the IRA pays into your estate when you pass, then the IRA has to be cashed in within five years of your death. Your children will lose the opportunity to stretch IRA distributions over their lifetimes.

An estate planning attorney can help guide you through this entire process, working through all the details. If your goal is to avoid probate, they can make that happen, while protecting you and your loved ones at the same time.

Reference: Santa Cruz Sentinel (March 24, 2019) “After husband’s death, wife needs to create revocable trust”

Does Estate Planning Include Your Account Passwords?

With most bank customers receiving financial statements electronically instead of on paper, there are some actions you need to take to be sure your accounts and account passwords are incorporated into your estate planning.

Kiplinger’s recent story, Your Estate Plan Isn’t Complete Without Fixing the Password Problem,” says that having online access to investments is a great convenience for us. We can monitor bank balances, conduct stock trades, transfer funds, and many other services that not long ago required the help of another person.

The bad thing about these advancements is that they can make for a very difficult situation for a surviving spouse or executor attempting to determine where the assets of a deceased person are held.

This was in the news recently, when the founder and CEO of a cryptocurrency exchange died unexpectedly. Gerry Cotten didn’t share the password to the exchange’s cold storage locker—leaving $190 million in cryptocurrency belonging to his clients totally inaccessible. Investors may never see their funds again.

You can see how important it is to provide a way for someone to access your data, if you become incapacitated or die.

The easiest, but least secure answer is to just give your account passwords to a trusted family member. They’ll need passwords to access your accounts. They’ll also need a password to access your email, where electronic financial statements are sent. Another simple option is to write down and place all passwords in a safe deposit box. You should be aware that this may be a violation of the terms and conditions of the account custodian.

Your executor or guardian/attorney-in-fact through a power of attorney (in the case of incapacitation) can access the box and your passwords to access your computer, email and financial platforms.

This is a bit safer than simply writing down and providing passwords to a trusted friend or spouse. However, it requires diligence to keep the password list updated.

A more secure way to safely and securely store passwords is with a digital wallet. A digital wallet keeps track of all your passwords across all your devices and does so in an encrypted file in the cloud.

There’s only one obstacle for an executor or surviving spouse to overcome—the password for your digital wallet. However, as mentioned above, the custodian of the account may terminate the account for sharing your account passwords.

It is highly recommended that you research this issue and review your options with your account like Facebook that can designate what happens to the account.

Reference: Kiplinger (April 19, 2019) “Your Estate Plan Isn’t Complete Without Fixing the Password Problem”

Why Do Singles Need These Two Estate Planning Tools?

Morningstar’s article, “2 Estate-Planning Tools That Singles Should Consider” explains that a living will, or advance medical directive, is a legal document that details your wishes for life-sustaining treatment. It’s a document that you sign when you’re of sound mind and says you want to be removed from life supporting measures, if you become terminally ill and incapacitated.

If you’re on life support with no chance of getting better, you’d choose to have your family avoid the expense and stress of keeping you alive artificially.

Like a living will, a durable power of attorney for healthcare is a legal document that names an agent to make healthcare decisions for you, if you are unable to make them yourself.

A durable power of attorney for healthcare can provide your instructions in circumstances in which you’re not necessarily terminally ill, but you are incapacitated.

When selecting an agent, find a person you trust enough to act on your behalf when you’re unable. Let this person know exactly how you feel about blood transfusions, organ transplants, disclosure of your medical information and other sensitive topics that may arise, if you’re incapacitated.

A power of attorney eliminates any confusion, especially if this person is someone other than your spouse. Your doctors will know exactly who the decision-maker is among your relatives and friends.

These two documents aren’t all that comprise a fully comprehensive estate plan. Singles should regularly make certain that the beneficiary designations on their checking and retirement accounts are up to date.

You should also consider your life insurance needs, especially if you have children and/or a mortgage.

It is also important to understand that a living will doesn’t address the issues of a will. A will ensures that your property is distributed after your death, in accordance with your wishes. Ask for help from an experienced estate planning attorney.

These two documents—a living will and a durable power of attorney—can help ensure that in a healthcare emergency, any medical and financial decisions made on your behalf are in accordance with what you really want. Speak with to an estate-planning attorney in your state to get definitive answers to your questions.

If you are in California, these two documents are often combined and are called an Advance Health Care Directive. 

Reference: Morningstar (April 23, 2019) “2 Estate-Planning Tools That Singles Should Consider”

Medicaid Planning and Estate Planning Documents

The conversation that you have with an estate planning attorney, when you are 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. Many conversations with clients include a conversation about Medicaid planning and estate planning documents.

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

An estate plan also includes a power of attorney, so someone you chose can serve as your agent to transact business and handle your financial matters if you are incapacitated. There should also be a declaration of conservator, 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 at this time. As we get older, the need to address long term care becomes more important. Making the right decisions now, could have a big impact on the quality of your retirement and your later in life medical care. It is important to have a conversation about Medicaid planning before it is too late to plan.

If you have not updated your will or your powers of attorney, specifically a durable power of attorney for property, it would be wise to do so now. You will need a document to clearly authorize your agent to deal with assets. Any documents that are out of date, or in which named agents have predeceased you, won’t be effective, leading 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, the agent may not be able to protect your assets.

This is 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 eliminate assets to be eligible for Medicaid coverage, this planning needs to be done well in advance. In numerous states, there are state administered programs that pursue recovery of assets when a person has received Medicaid benefits. In California this program is called Medi-cal.

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

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

What Are the Six Most Frequent Estate Planning Mistakes?

It is a grim topic, but it is an important one. Without a legal will in place, your loved ones may spend years stuck in court proceedings and spend a lot in legal fees to settle your estate. The San Diego Tribune writes in its recent article, 6 estate-planning mistakes to avoid, that without a plan, everything is more stressful and expensive. Let’s look at the top six estate planning mistakes that people need to avoid:

No Plan. Regardless of your age or financial status, it’s critical to have a basic estate plan. This includes crafting powers of attorney for both healthcare and finances and a will.

No Discussion. Once you create your plan, tell your family. Those you’ve named to take care of you, need to know what you’ve decided and where to find your plan.

Focusing Only on Taxes. Estate planning can be much more than just about tax avoidance. There are many other reasons to create an estate plan that have nothing to do with taxes, like charitable giving, special needs planning for a family member, succession planning in the event of incapacity and planning for children of a prior marriage, to name just a few.

Leaving Assets Directly to Children. If you leave assets directly to your children or grandchildren under age 18, it can cause unintended custodian or guardianship issues. Minors can’t own legal property, so a guardian will be appointed by the court to manage the property for them, until they reach age 18. If you don’t name a guardian, the court will appoint one for you and that person may have very different ideas about how the account should be managed and invested.

Making Mistakes with Ownership and Property Titles. With many blended families, you may want to preserve assets from an inheritance as your own separate property or from a prior marriage for your children. There are many tax consequences and control issues in blended families about which you may not be aware.

Messing Up Your Trust. Many people don’t properly fund or update their trusts. An unfunded trust doesn’t do anyone any good. Assets that aren’t titled in the name of the trust don’t avoid probate.

Finally, be sure to review your estate plan regularly, as your circumstances change.

Reference: San Diego Tribune (April 18, 2019) “6 estate-planning mistakes to avoid”

What Are Some Advantages of Making Lifetime Gifts?

There are several non-tax advantages of making lifetime gifts. One is that you’re able to see the recipient or “donee” enjoy your gift. It might give you satisfaction to help your children achieve financial independence or have fewer financial concerns.

WMUR’s recent article, Money Matters: Lifetime non-charitable giving,” explains that lifetime giving means you dictate who gets your property. Remember, if you die without a will, the intestacy laws of the state will dictate who gets what. With a will, you can decide how you want your property distributed after your death. However, it’s true that even with a will, you won’t really know how the property is distributed, because a beneficiary could disclaim an inheritance. With lifetime giving, you have more control over how your assets are distributed.

At your death, your property may go through probate if you don’t have a trust or beneficiaries on your accounts. Lifetime giving will help reduce probate and administration costs, since lifetime gifts are typically not included in your probate estate at death.  Unlike probate, lifetime gifts are private.

Let’s discuss some of the tax advantages of lifetime gifts. First, a properly structured gifting program can save income and estate taxes. A gift isn’t taxable income to the donee, but any income earned by the gift property or capital gain subsequent to the gift usually is taxable. The donor must pay state and/or federal transfer taxes on the gift. There may be state gift tax, state generation-skipping transfer tax, federal gift and estate taxes, as well as federal generation-skipping transfer (GST) tax.

A big reason for lifetime giving is to remove appreciating assets from your estate (i.e., one that’s expected to increase in value over time). If you give the asset away, any future appreciation in value is removed from your estate. The taxes today may be significantly less than what they would be in the future, after the asset’s value has increased. Note that lifetime giving results in the carryover of your basis in the property to the donee. If the asset is left to the donee at your death, it will usually receive a step-up in value to a new basis (usually the fair market value at the date of your death). Therefore, if the donee plans to sell the asset, she may have a smaller gain by inheriting it at your death, rather than as a gift during your life.

You can also give by paying tuition to an educational institution or medical expenses to a medical care provider directly on behalf of the donee. These transfers are exempt from any federal gift and estate tax.

Remember that the federal annual gift tax exclusion lets you give $15,000 (for the 2019 year) per donee to an unlimited number of donees, without any federal gift and estate tax or federal GST tax (it applies only to gifts of present interest).

Prior to making lifetime gifts, discuss your strategy with an estate planning attorney to be sure that it matches your estate plan goals.

Reference: WMUR (April 18, 2019) “Money Matters: Lifetime non-charitable giving”

Why Should I Sign a Prenup?

NBC News’ recent article asks “Prenuptial agreements: What is a prenup and should I get one?”

So, should you sign a prenup?

First, a prenup is a legal agreement entered into between two people before they are married, that can cover many issues dealing with property rights and assets. In addition to the traditional role of division and distribution of assets in the event of divorce, pre-nups can also cover death, incapacity, estate planning, student debt, spousal support, and other legal issues.

There are other reasons to sign a prenup. For example, what if one spouse has a child from a prior marriage and must provide support for that child from marital income? Divorce laws also vary state by state, so if you live in a state that has laws of equitable distribution, but you move to a community property state, it is important to protect your assets and instruct how they’ll be distributed.

When financial assets get commingled in marriage, it can get complicated. Buying a house together with just one person’s money, is deemed to be commingling. Starting a business together using one person’s capital is also commingling. Even transferring money more than a few times can constitute commingling. The longer you’ve been married, the more apt you are to commingle your assets and have non-marital assets become marital. As a result, they’re divisible assets.

But aren’t prenups just for rich people? No.

Many folks think of a prenuptial agreement, as only for those with substantial means to protect. This isn’t always true, as many millennial clients hire attorneys to assist them with a prenup to protect them from a future spouse’s student debt.

These couples have discussed their financial situations in detail, before hiring attorneys to draft a prenup. That makes for no unpleasant surprises.

Finally, you can get a prenup online, but you’re likely wasting your time and money. That’s because there are complex legal issues involved, and you need to understand your rights. An online approach is risky and may not be complete.

Reference: NBC News (April 12, 2019) “Prenuptial agreements: What is a prenup and should I get one?”

What Are the Five “Must Have” Estate Planning Documents?

WTHR 13’s recent article, “The 5 legal documents every adult should have” lists the five “must have” estate planning documents involved in estate planning.

  1. General Durable Power of Attorney. This document states who you want to make decisions if you’re unable to do so for yourself. Without it, your family may have to petition the courts to become your legal guardian/conservator, which can be time consuming and expensive. A power of attorney allows the person whom you select, to pay your mortgage or rent and your bills.
  2. Health Care Power of Attorney. (Also known as an Advance Healthcare Directive) This document plans for the situation, if you are unable to make your own health care decisions. You name someone you trust, like family members or friends, to do this on your behalf.
  3. Will. This says that when you pass away, here’s what I want to happen. A will states who will get your assets after your death. If you don’t have a valid will in place, the state laws of intestacy will govern what will happen to your estate—which may not be what you want.
  4. Living Will. This is the document in which you state your instructions for end-of-life care, such as life support. This document is used to make certain that your family and physicians know what you want your end-of-life care to be. A living will is much different than a will and many times may be incorporated into the Advance Healthcare Directive.
  5. Revocable Living Trust. This document can be important, if you’re a parent with young children and would like your assets passed down properly to your children if you die. Typically, if children are under 18, they’re legally minors and can’t receive assets. A trust can help coordinate the receiving your property and avoid probate on your death.

An experienced estate planning attorney can help you with the creation of these documents, while creating an overall plan so that your wishes are followed, your legacy is protected and your family is secure.

Reference: WTHR 13 (April 17, 2019) “The 5 legal documents every adult should have”