Stay Ahead Of The Curve: Planning For Incapacity

Death and taxes are certain, but so is another item: Uncertainty. You’re bound to face surprises in your life down the road, and one of those surprises may be the need for some form of long-term care. As we have a better chance of living longer, so we have a better chance of needing help in the future. For some, that may be an adult child taking care of you. Others may need professional home health care. Of course, there’s always a chance assisted living or a nursing home may be needed.

The best thing you can do is plan in advance. Sure, we don’t want to think about those dreadful possibilities, but if you plan now, you can make sure you don’t leave your family in bad financial shape. A nursing home costs over $100,000 a year. Home health care and assisted living vary depending on where you reside, how many hours of care you need, and other factors.

First Things First: Execute a Power of Attorney
A Power of Attorney is fundamental in elder planning. If you become incapacitated, you need a general durable power of attorney that a trusted person can utilize on your behalf to take actions for you, make decisions for you, pay your bills and much more. Often times, powers of attorney have inadequate power for elder planning. If it’s been a while since you’ve had yours reviewed (or if you don’t have one), make an appointment with me to discuss. Without a power of attorney, guardianship (an expensive process which you have no control over) may be needed. This is a sad process, as the court declares you incompetent, you lose all rights, and you don’t get a say in who your guardian is. Also, legal fees are high.

Next, Do Advanced Elder Planning
Advanced planning usually includes the use of a Medicaid Asset Protection Trust (MAPT). By utilizing a MAPT, you can protect certain assets from ever being spent on your long-term care, while still retaining a bit of control over those assets. Ideal assets for a MAPT include a second home, a pot of “never money”, and special annuities purchased under the trust. The trust is more expensive than an ordinary estate plan, but it’s more than an investment—it’s peace of mind. For example, if you have a second home worth $400,000, that is not exempt from Medicaid spend-down. In other words, you have to sell that house to pay for your care before you qualify for Medicaid. By putting it into a trust well in advance, you surpass the 5-year look back period that Medicaid imposes. At that point, the second home is exempt from spend-down, and you can leave it to your heirs despite getting long-term care. I can’t think of better peace of mind than that. The trust is, in effect, an insurance policy that doesn’t involve insurance companies!

Other advanced planning includes the use of long-term care insurance and universal whole life insurance policies with a long-term care rider (your death benefit can be used for your long-term care needs if you need it). Sometimes, insurance makes sense. We can explore this if the MAPT isn’t a good fit.

Beyond The Legal ‘Stuff’
Make sure you have a good support system of family and friends that you can rely on in the future if needed. If you have a good support system, then you have a better chance of getting quality care and less of a chance to fall for elder financial abuse scams.

If we can help you with elder planning, please reach out to us and schedule your consultation by emailing or calling (215) 706-0200 and asking for Anne.