Most of the seniors and families we have met desire to be fiscally responsible, but when it comes to long term care expenses and planning for the later years of life, the path that will help you reach your goals may be confusing to navigate. You may hear conflicting advice from well-meaning friends and various types of professionals. Frustration and confusion can lead to procrastination, which usually has an expensive and avoidable consequence.
Please be aware that the tips below are general in nature. Seniors who are thinking about one or more of the actions listed below should consult an elder law attorney to determine how each action will affect their specific situation. Laws vary somewhat from state-to-state.
Don’t add a relative’s name to the deed of your residence. Many seniors desire to protect the “family home” for future generations. Changing the deed of your home, other than to include or exclude your spouse, probably will create complications if you need to apply for public benefits to pay for long-term care.
Do consider the possibility of using a trust to protect your home, if you are able to do this at least five years before an expected need for long-term care. You must make sure that the trust is properly drafted to be irrevocable and has the correct provisions to be effective as an asset protection device, without unnecessarily conceding occupancy privileges or future tax benefits.
Don’t add a child’s name on your bank account as a joint owner. Many families see this action as a method to make it easier to help their aging parents manage their finances, or to reduce inheritance taxes. However, in addition to creating complications if the need to apply for public benefits for long-term care arises, if the child should unexpectedly pass away before the parent, the parent will have to pay inheritance taxes on a portion of their own money. Divorce or other litigation related to the child would also threaten the parent’s assets.
Do see an attorney to have your durable financial power of attorney drafted, so the person who is designated as your agent can have access to your account as your agent in order to write checks and otherwise help to manage your business affairs.
Don’t assign more than one person at a time to act as an agent in a Power of Attorney document. When two or more people are trying to act simultaneously as agents and they do not agree, unpleasant and expensive court proceedings may result. In addition, it will be time consuming for more than one person to have to sign off on every action and decision.
Do appoint one individual as your agent who demonstrates responsibility and will act according to your wishes. It is wise to appoint at least one successor agent who can step in to act if the first agent predeceases you or must resign.
Don’t purchase an annuity if you are older than age 70 or have a chronic illness unless you have consulted with an advisor who is not affiliated with the sales agent. If you need funds in the future to pay for unforeseen events, you could be faced with hefty penalties or surrender charges to access your money from an annuity. In addition, for certain public benefits, an annuity could be counted as both income and an asset, and make it harder to qualify. Annuities have contract terms and provisions that are difficult for most people to understand, and require little follow-up service from the sales “advisor,” who is usually paid a large up-front commission.
Do consult with an elder law attorney and use a fee-only financial planner to determine an appropriate financial investment strategy.
Don’t wait too long if you are considering purchasing long-term care insurance. Older purchasers pay a much higher annual premium than younger purchasers for the same policy. In addition, an individual may develop a health condition that would prevent any company from offering a policy.
Do work with an insurance agent who is willing to show you quotes from several different companies. The policy costs and medical underwriting determinations can vary significantly among insurance companies.
Don’t pay a family member or friend “under the table” to provide caregiving assistance. Significant family liability occurs if nursing home care is needed eventually, and an application for government benefits to pay for that care is made within five years of improperly documented caregiving payments. The government likely will consider such payments to be “gifts,” and therefore impose a penalty period during which tens of thousands of dollars of nursing care expenses could become the financial responsibility of the adult children of a nursing home resident. If you have already made this mistake, see an elder law attorney immediately, before the parent runs out of assets and must apply for government assistance, since sometimes a corrective remedy is possible.
Do see an attorney to draft a caregiver agreement, which is a document that specifies the details of caregiving services and the reimbursement provided. Money paid under a proper caregiver agreement, which reflects a reasonable and formal caregiver plan, will not be penalized by the government as a gift.
The attorneys at Keystone Elder Law have seen how such actions, taken even with well-intentioned but incomplete advice, can backfire and create complications for families. Avoid getting caught in the snare of unnecessary family drama and financial liability. Get advice about all of the pieces of the elder care puzzle as early as possible when encountering a long-term care need for a family member. Many of our wisest clients work with a fee-only financial planner, a legal advisor and a CPA.
Dave Nesbit, Attorney with Karen Kaslow, RN