Archive for May, 2012

Today, I’ll address a common misconception that I hear every week. Many people are under the mistaken belief that Medicare will cover the long term care costs of illnesses like Parkinson’s disease and Alzheimer’s. Hopefully, this article will clear things up a bit.

A statement on the Medicare.gov website clarifies what Medicare will pay for.

“Generally, Medicare doesn’t pay for long-term care. Medicare pays only for medically necessary skilled nursing facility or home health care. However, you must meet certain conditions for Medicare to pay for these types of care. Most long-term care is to assist people with support services such as activities of daily living like dressing, bathing, and using the bathroom. Medicare doesn’t pay for this type of care called “custodial care“. Custodial care (non-skilled care) is care that helps you with activities of daily living. It may also include care that most people do for themselves, for example, diabetes monitoring. Some Medicare Advantage Plans (formerly Medicare + Choice) may offer limited skilled nursing facility and home care (skilled care) coverage if the care is medically necessary.”

How does Medicaid cover long term care costs?

Fortunately, there is a government program that will help pay for long term care costs – Medicaid.  Unfortunately, this program is unfairly discriminatory and will only pay for care for individuals who have less than $1,500 to $2,000 in assets (and in about 22 states, the program will only cover individuals who fall below a certain income threshold).  All other individuals wanting help from Medicaid must impoverish themselves paying for their own elder-care services first, before Medicaid will help them.

Planning for the final years of life and dovetailing government programs, care provider systems and funding sources can be invaluable yet complicated.  This area of planning can be one of the most challenging endeavors undertaken by anyone attempting to help seniors in this final phase of life.

The National Care Planning Council has introduced a new long term care planning tool called “Care Resource Planning“.  It is impossible to predict what your future elder-care needs will be.  You cannot determine in advance if you will need home care, assisted living or even nursing home care, but you can have a plan in place that will provide the financial, legal and family support as well as protecting your assets, no matter what happens. You can get more resources and  information about this at here.

Unexpected Retirement Costs – A Head’s Up

Sometimes it’s hard to predict what expenses you will have after you retire. Since your lifestyle will change,you’re probably expecting your expenses to decrease. But here’s a list of some costs you might not be thinking about.

Kiplinger’s asked financial planners from the National Association of Personal Financial Advisors what unexpected costs people incur. Here’s a list of the 5 big ones you need to factor into  your planning.

Health care costs. The cost of health care came up most often as a top retirement challenge among retirees. According to Fidelity Investments, the average 65-year-old couple will spend about $400,000 out-of-pocket throughout retirement until age 92, not including long-term-care costs.

And Medicare is not free either. While Part A of traditional Medicare, which covers hospital benefits, is free, you’ll pay a premium for Part B to get coverage for outpatient services and a premium for Part D to get prescription-drug coverage. Add in the premium for a private Medigap policy, which helps cover the costs that Medicare doesn’t cover, and a couple can end up paying $6,500 a year in Medicare premiums alone.

Higher spending. You no longer have to budget for work clothes or commuting. But you may have to start paying for some things that you used to receive as perks through work, such as a company car, meals, travel or computers.

Travel. Many retirees plan to see the world in their first few years of retirement, but traveling is pricey, and the costs of transportation, lodging and entertainment can add up quickly. Travel expenses are often 10% to 20% higher than what people budget.

Using a common measure of assuming expenses after you retire will be 75% of what you spent while you were working is probably a faulty assumption these days. It’s important to sit down and write out a detailed list of your current monthly expenses and then be realistic which expenses will be gone and which new ones you’ll have in your new life style.

Social Security taxes. You mostly likely will still have to pay social security taxes even after you start collecting benefits. Up to 85% of social security benefits are taxable, and the income thresholds that trigger Social Security income taxation are low — $32,000 for a married couple, for example.

Taxes on nest-egg withdrawals. Uncle Sam not only wants a piece of your Social Security benefits, but he’s ready for his slice of your pretax retirement savings. When you withdraw money from a traditional IRA or 401(k), those dollars stashed away pretax have a tax bill attached to them when they come out of the account. So if you need $30,000 to buy a new car and you are in the 25% tax bracket, you’ll need to withdraw $40,000 from your IRA to cover the cost of the car and the $10,000 tax bill on the withdrawal.

You can read more here.

Many of my clients who are single and have no children face a common dilemma. Who they name in the all-important role of  representative under their power of attorney and health care proxy. Notice I didn’t say executor. I’m talking about who can you count on to take care of you – not your estate after you’re gone.

Unfortunately for many elderly and single persons the legal system and, perhaps to an even greater extent the healthcare system, are designed around family-based persons. The primary caregiver and decision-maker for so many of our elderly is an unpaid family member, usually an adult child. So, to whom can the single elderly person turn when they have no children?

This is a question that comes up often, but the answers tend to be sparse and inadequate. Enter a relatively new development: the Care Committee. The New Old Age Blog on the New York Times recently addressed this concept in an article titled Care by Consensus.

More likely than not, an elderly person without children already turns to other people in his or her life for advice and counsel. These other people serve as surrogate family members. In a sense, that is all a Care Committee is, with the added benefit of legal organization.

Here’s how it works: You ask and appoint members of your Care Committee and task them with carrying out your intentions when you are not able to articulate them yourself. Accordingly, they assume these powers only when you are incapacitated. Think of it as establishing an extended type of living will, or advanced directive. You can even spell out your intentions and simply ask your committee to follow them, or else appoint a guardian or care manager to follow them instead.

It is at least one possible solution for a fairly intractable problem. Nevertheless, committees always have their drawbacks, especially when there are disagreements. Of course, your family members also can (and likely will) disagree at times.

Another practical problem concerns the very friends you would appoint to your Care Committee. Unless they are significantly younger, they may have their own medical care emergencies and concerns, causing you to constantly revise and refine your committee choices.

But a Care Committee may be a good option for the right situation. If you are considering a Care Committee, be sure to call us (or other competent elder law counsel) to help you evaluate this option and prepare the proper legal instruments.

Heirs betting on their parents’ golden nest eggs are running into harsh demographic realities. Longevity and a slew of changes that have transformed family relationships (ex-spouses, step-kids, step-grand kids, siblings living thousands of miles apart) are turning the already-prickly matter of inheritances into a gargantuan challenge.

Add the gaping generational divide between Depression-era parents, who valued frugality above all else, and their Baby Boomer children, who relish self-reward, and the dynamics can be explosive.

“I see families who never talk to each other again,” says Kotzer, a Canadian lawyer who has written several books, with law partner Barry Fish, on fighting over estates (the latest is Where There’s an Inheritance…). “Family to me is our greatest asset, and we are losing family. …It’s the savers vs. the spenders.”

People are living longer. Health care costs for the frailest seniors are eating up family estates. Their reliance on others to feed and care for them and their finances can put more elderly at risk of financial or physical abuse by the caretakers they depend on.

The shaky economy adds to the volatility as more adult children lose their jobs and see their retirement savings and home equities dwindle while debts mount.

Despite the downturn, more than $20 trillion will be transferred to heirs in the next 50 years — the largest transfer of wealth in U.S. history, according to the Center on Wealth and Philanthropy at Boston College.

“Boomers took risks, and they have a high lifestyle,” Kotzer says. “The housing market went down. The (stock) market went down. A lot of these Boomers have been laid off. Where’s the money coming from?”  the prospect of an inheritance stirs a cauldron of emotions — not always heartwarming.

Eileen Zenker, director of client services at SeniorBridge, a national care management company, says it’s common for children who are faced with costly care for their parents to react this way: “I’m watching my inheritance go down the drain.”

And parents who are in their second marriage have another worry. They need to make sure their children and not their stepchildren inherit their assets. Family feuds over inheritance are as old as the Bible (Jacob tricked his twin brother Esau out of his birthright and their father’s blessing.), and they can multiply in blended families.

There are ex-wives and ex-husbands, children and stepchildren, parents and stepparents. More than half of all first marriages end in divorce and about 75% of divorced people will marry again, according to the National Step family Resource Center. About 65% of these unions will include children from previous marriages. More than 40% of American adults have at least one step-relative, according to a Pew Research Center study earlier this year.