Among many other
challenges of aging is determining when it is appropriate to accept assistance
with healthcare. There are several different options available, such as
remaining in your home with aides, moving to an assisted living facility, or
moving to a nursing home. Each option has different financial ramifications and
considerations. I hope to provide you with an idea of the relative costs and
ways to pay for the different options. In addition, I will go through some of
the estate planning techniques available to assist you in this process.
A Smooth
Transition
The correct estate planning documents make the transition smoother. Here
are some of the most important ones:
Power of Attorney: A Power of
Attorney is an incredibly powerful document. The purpose is to allow another
person to step in to assist you with taking care of your financial and legal
affairs if you are unable to do so. Typically, spouses are designated to act
for one another, and then one or more children are designated as successor. In
the absence of a Power of Attorney, it would be necessary to seek a
guardianship through the court in order to pay bills, sell property, or engage
caregivers. While adding children to accounts will allow them to use your
assets to pay your bills, it creates the potential for other problems. I
suggest designating at least one person, with a backup as agent under power of
attorney. While writing this article, I actually received a call from someone
asking what to do as the mother had a stroke and is the sole agent for the
father who is in a nursing home. Unfortunately, their options are limited.
Medical Directive/Healthcare
Power of Attorney:
It is important to designate whom you would like to speak on your behalf should
you be unable to communicate with your medical providers. This document may
also include direction to your healthcare providers as to what type of medical
intervention you would like performed. Many people also include the name of the
rabbi that they want to interpret halacha as applies to their particular
situation. A medical directive is different form a DNR or the MOLST form used
in Maryland and should be prepared for everyone, not just the old or sick.
Will: Every person
should have a Will. All Wills, even very simple ones, designate the person who
will identify, gather, and divide your assets after your death. The Will should
clarify whom you want to receive your assets when you are gone and whether they
should receive those assets in trust or outright. If you do not have close
family, it is important for you to sign a Will as, in the absence of a Will, it
is sometimes necessary to engage companies to identify heirs, and that can be
extremely costly.
Trusts: There are many
types of trusts. Revocable Trusts help to avoid probate but do not reduce
taxes. They can also be useful in helping transition to having someone else
help you with taking care of your assets. Irrevocable Trusts can be used to
reduce many taxes as well as to protect your assets from the state should you
need to go into a nursing home. I provide a more detailed explanation of
Medicaid trusts below.
Levels of Care
Homecare: Most people prefer the idea of aging in place. Some
people are able to remain in their own homes, while others move in with a child
who is able to assist them as they age. If you need help with your care, you
might choose to hire a caregiver. The cost of caregivers has a large range. Sometimes
people are able to arrange for something akin to an au pair to provide
unskilled care, like assistance with dressing, driving and general
companionship. This is generally the least expensive option. Others prefer to
have caregivers who come into their home but do not live with them. For 24-hour
care, expect to spend at least $360 to $500 and possibly more each day for in-home
caregivers who do not come through an agency. For 24-hour care through an
agency, expect to spend about $525 to $625 per day. In addition to the cost,
maintaining consistent care can be difficult when bringing caregivers into your
home. Further, it is important to be sure that they will be able to give you
the care you need and keep you safe.
Adult Continuing Care
Communities:
If you have the financial resources, a wonderful option is an adult continuing
care community. In these communities, you purchase an apartment of a desired
size and pay a monthly fee. As such, it can be very expensive. The benefit of
this option, however, is that almost all continuing care communities also have
assisted living and nursing home wings or buildings. If you run out of funds to
pay, they have to allow you to continue to live in the community as long as you
wish. There are different price points depending on whether or not you want to
be able to “sell” your unit when you leave and receive a refund or simply allow
the deposit to diminish over time.
Assisted Living: An assisted living facility is generally the next step
in care if you cannot afford or do not wish to utilize a continuing care
community. When one resides in an assisted living facility, one pays a monthly
fee to the facility to rent a room and a second fee to receive care. The
facility fee, often $3,000 to $6,000 per month, typically includes three meals
a day, housekeeping once or twice a week, and laundry services. Rooms in
assisted living facilities range from small bedrooms with attached bathrooms to
two bedrooms with a living space. Assisted living facilities have both
physicians who regularly visit the facility as well as some specialists who
will come to the facility. They also usually have hair and nail salons in their
buildings.
There is a second
fee at assisted living facilities that is tied to the level of care that a
particular resident requires and can range from $1,000 to $6,000 per month. Most
assisted livings must be paid from your own funds, and the state will not allow
the use of medical assistance (Medicaid) for the costs. It is important to
understand that an assisted living does not provide one-to-one care. Additionally,
the state strictly regulates assisted livings. While this is a good thing, it
can have unintended consequences. As an example, I had a client who frequently
fell from her bed. Other than that, she did very well in her assisted living
and they loved her. I wanted to get her a bedrail which would have solved the
problem. I was told that the state calls that a “restraint,” which is
impermissible for an assisted living. The end result was that she had to move
into a nursing home to avoid further injury from falling from the bed. For a
person with the financial means and without a lot of family or friend support
to go shopping or drive them to medical appointments, an assisted living can be
a terrific option.
Nursing Homes: Nursing homes
have gotten a bad reputation which is not warranted in most cases. Nursing
homes provide complete care for individuals in need of support. Nursing homes
typically have both long-term care as well as shorter-term rehabilitation
options. Like an assisted living, one does not receive one-to-one care in a
nursing home. Nursing homes typically cost between $10,000 and $13,000 each
month. If a person no longer has the financial means to pay for a nursing home
and qualifies for the level of care offered by the nursing home, the state can
pay for the care.
Paying for Care
Qualifying for Medical
Assistance: Medical
Assistance, or Medicaid, can pay for nursing-home care. Nursing homes may have
a limited number of Medicaid beds, but if they participate with Medicaid, they
cannot force a person to leave simply because he or she needs to use Medicaid
to pay for the care. And it is a fallacy that a person will receive worse care
because he or she is on Medicaid. There are two components of qualifying for
Medicaid. First, one must need nursing home care. This is defined as needing
assistance with at least three activities of daily living. Activities of daily
living include dressing, feeding one’s self and toileting. If a person
qualifies medically, the second analysis is whether he or she qualifies
financially. One cannot have more than $2,500, if single, or $3,000, for a
married couple, in
a bank account in order to qualify for Medicaid. Many people feel that they
must impoverish themselves before seeking Medicaid. This is not so.
There are legal
ways of qualifying for Medicaid while also retaining funds for your spouse,
your children, or other aspects of your care. When applying for Medicaid, one
must present five years of all financial records (bank accounts, investment
accounts, etc.) as well as other items, such as marriage and/or divorce
records. When I am asked if it is too late to apply, my answer is generally,
absolutely not. We once qualified a gentleman for Medicaid whose sole assets a
few days before application were his home and about $20,000 in the bank. We
discovered that he was overscale (had too much money) on the 27th of
the month before application and had to spend him down by the 31st. We
were able to quickly contract with an extremely trustworthy contractor who would
take care of the deferred maintenance that the home desperately needed. In this
case, we had several ideas of how we would preserve the home despite the fact
that we were not able to transfer it five years prior to his admission.
Homes typically
are not counted as an available resource when applying for Medicaid. If the
home is in the name of the resident and not otherwise protected, Medicaid will
be able to file a lien after the resident dies and recover funds paid for. It
is frequently still worth it. For example, in another matter, my client had a
home valued at $125,000. She qualified for Medicaid with the home being exempt
for qualification purposes. She then received $250,000 of Medicaid before she
died in the facility. Medicaid recovered the $125,000, but the family had
received an additional $125,000 of benefits and also was able to use the home
during the several years that she was in the facility.
When a person is
married, we are often able to make use of various techniques to protect close
to 100% of a person’s savings.
Medicaid Trusts: If you have a lot
of retirement savings, however, early planning is important. One way that we
protect assets when we are able to plan in advance is through the use of an
irrevocable trust. Sometimes referred to as a Medicaid trust, we create a trust
for the benefit of a person’s children or other trusted relatives (rarely
friends). No funds can be distributed directly to the person whom we wish to
qualify for assistance, but they can be distributed to a beneficiary, and that
beneficiary can use them to pay for things like groceries, car insurance,
clothing, etc., that are for the trust creator’s benefit. In one case, I had a
client with $500,000 of assets that we could not protect (it’s a longer story
than space permits) and an additional $500,000 of savings. She gave her sons
the $500,000 of savings in trust and lived off of the other funds. This allowed
us to provide the two sons with a significant inheritance notwithstanding her
very expensive medical care.
Long Term Care Insurance: Another very
important way to protect your assets and/or provide you with a window to spend
down assets is through long term care insurance. Long term care insurance can
pay for caregivers at home, an assisted living facility, care in a nursing home,
and more. Typically purchased when you are in your 50s or 60s, it can be
expensive, but the benefits can far outweigh the costs. There are many
different products, and I suggest that all of my clients at least inquire as to
the affordability since it can be an excellent way of preserving assets while
paying for care.
* * *
This is really
just a short overview of the estate planning documents and various options
available as you age. There are literally books about each one of the topics
covered and many different methods of protecting assets. The two things that I
hope you can take from this article are: first, that you must have a power of
attorney. If you will only have one estate planning document, this is the most
important one to have. Second, it is never too late to plan. Early planning may
be best, but we do not know what the future brings. As such, seek guidance from
a qualified individual who can help you and your loved ones make sure that you
get the best care and preserve as many assets as possible.
Elizabeth
A. Green, Esq. is a member of the Wealth Preservation Group at Pessin Katz Law
in Towson. She writes and speaks regularly about topics related to estate
planning. She can be reached at egreen@pklaw.com or 410-769-6150.
