Keystone Elder Law is evolving to become an “extended care planning and coordination firm.” Our expansion of services complements the traditional skills of a lawyer and provides a valuable and more comprehensive approach to issues of aging and older persons. The term “extended care” is not used as commonly as is the term “long-term care,” which is used by the insurance industry.
“Extended care” more accurately describes what happens when Medicare stops paying for care in a skilled nursing facility after 100 days but care is still needed for an undetermined extended period of time. Those who have inherited healthy genes and follow disciplined diet and exercise patterns probably have an increased chance of living long lives. But as they age gracefully, even they eventually could become frail and need an extension of home care services beyond house cleaning and lawn care to remain safely at home in their final years. Medicare generally does not pay for such minor but regular and ongoing home care assistance with daily Activities of Daily Living (ADLs) either at home or at licensed personal care facilities.
The basic step of any extended care plan is to make sure that appropriate legal documents are in place. These documents define the preferences of how a person will surrender control and responsibility to significant others to act legally either on behalf of or in support of one’s wishes. Legal documents have been and will be the subject of other columns. They include a durable financial power of attorney, a health care power of attorney, advanced care directive, consideration of the use of trust planning, and a will.
The documents can and probably should include different provisions for a married couple who is ten years into retirement and expecting to need extended care than for a younger married couple. For example, the gifting powers under a durable financial power of attorney for a person on the threshold of needing extended care are broader than would be necessary or advisable for the documents of newlyweds. Also, if one spouse enters a skilled nursing home, it is advisable for the well spouse to alter his /her will to manage the minimum inheritance required from the estate of the ill spouse so that the most beneficial outcome for the family can be obtained.
Ideally, the funding of an extended care plan should be addressed at the same time as the basic legal documents are being prepared or updated. Anticipating the probable need for extended care can, on one level, be a function of statistical probability. For example, insurance data suggest that more than 40 percent of persons who reach age 65 will ultimately need some level of extended care, and the typical time that such a claim is made is at age 81. But more than statistical averages, it is important to consider the particular health issues that either family genetic history or early-onset medical conditions suggest are likely to present in the future of the individuals who are the principal clients.
A care plan should consider the lifestyles of both the principals and the extended family. Even if potential family caregivers are available and willing, the impact that the principals’ need for regular home care over an extended period must be evaluated realistically to avoid caregiver burnout. Similar consideration should be given to accommodate a desire of the well spouse to continue in an accustomed lifestyle without sacrificing significant personal time or monthly income towards caregiving. The principals should determine if it will be acceptable to erode a planned legacy gift to children, grandchildren, or charity by the depletion of assets in order to pay for care.
Although extremely wealthy persons can afford to self-insure even if they are probably unwise to do so, middle class couples should confront the economic reality of extended care sooner rather than later. Suppose a married couple has a history of Alzheimer’s disease in the family and wants to make sure that a secure facility can be afforded without sacrificing cash flow for the well spouse or the intended legacy gifts. If both spouses are insurable at age 55, a $2,115 annual investment will produce as much as $687,000 in insurance benefits by age 81. This reflects an amount of $150 per day of payments per day increased annually at a compounded rate of 3 percent, which should be enough to pay for secured dementia care. That same insurance would cost a 65 year old couple $3,250 per year IF their health enables them to qualify. The value of the insurance would be more than 8 times the compounded value of their investment from self-insuring.
There is no one-size-fits-all for insurance or extended care plans, which should consider one’s lifestyle, projected monthly income, and other factors. Wartime veterans could be eligible to receive a special pension for extended care of nearly $70 per day, so while that is not enough to replace the need for insurance in all cases, as a general rule, a wartime veteran needs less long-term care insurance than a non-veteran. This is especially true if the veteran has optimized his/her ability to receive the pension through the use of trust planning.
Persons whose health excludes them from obtaining insurance should explore a family caregiver agreement or life estate arrangement in tandem or individually. Reverse mortgages can be a good idea to pay for home care but should never be used to buy an annuity or any other investment.
Sometimes a married couple fails to plan and suffers an unexpected crisis which begins in an ambulance and ends, after a short stay at a hospital, in a skilled nursing facility. Current laws allow elder law an attorney to juggle assets to accelerate eligibility for public benefits for nursing care as a solution to a financial crisis. Because changes in laws are likely to restrict these opportunities in the future, making plans to fund an extended care plan today is important for middle class baby boomers who do not wish to compromise their lifestyle or depend on their children.