Are you a “mature” American age 65 or older, do you care about someone who is, or do you anticipate becoming a mature American yourself? If yes, then you're in good company. According to the U.S. Census Bureau, Americans 85 and older are the fastest growing demographic group and, right behind them, 79 million baby boomers are moving into retirement age themselves.
However, with advances in age come advances in health problems. Along with health challenges, there are unique legal challenges that need to be addressed. The body of law that addresses these challenges is commonly referred to as “Elder Law”.
Generally speaking, Elder Law can be defined as the holistic application of general legal principles to the specific needs of mature Americans. Many of these Americans are concerned with two fundamental threats to their dignity: (1) becoming incapacitated, and thereby losing control of their ability to make personal, health care and financial decisions; and (2) running out of money due to the catastrophic costs of long-term care. Fortunately, these threats can be minimized, or even avoided, through properly coordinated legal and financial planning.
As the number of birthday candles on your birthday cake increase, so do the odds of becoming incapacitated due to an injury or illness. Whether incapacity strikes suddenly or over time, the consequences are the same. Either you will have properly appointed decision-makers of your own choosing through legal planning in advance, or a judge (who likely does not know you or your loved ones) will appoint someone to make decisions for you under the ongoing supervision of the court. The legal planning alternative is less expensive, easier on your loved ones and protects your privacy.
According to commonly cited statistics, if you are over age 65 and single, then the odds are about 50 percent that you will need long-term care at some point. For married couples, the odds are about 75 percent that one spouse will need such care. For how long? The average stay runs about two and a half years.
Nationally speaking, a year in a nursing home is estimated to cost an average of $90,000. Little wonder that 50 percent of married couples with one spouse in long-term care are impoverished within one year of admission. For singles, that percentage jumps to 70 percent.
You may be thinking, “I have Medicare, so I don’t have to worry about long-term care, right?” Wrong. Medicare only pays for acute nursing home care, not chronic care. Think of acute care as rehabilitation after hip surgery. You will be going home to care for your own daily needs. Think of chronic care as needing help with “the activities of daily life” like bathing, eating and dressing, not to mention dementia or Alzheimer’s. Even for acute care in a skilled nursing home, Medicare is limited to paying for up to 100 days with strict eligibility requirements and full payments are limited to the first 20 days with co-payments thereafter. Your Medigap (i.e., Medicare Supplement) policy won't pay for your long-term care, but it may pay your Medicare co-payments for days 21 through 100.
While Medicare is solely a federal program, Medicaid is a joint state-federal program. Each state operates its own Medicaid program (and may give it a different name than “Medicaid”), but it must adhere to federal guidelines to receive federal funds. Federal money pays for half the state’s Medicaid costs, and the state pays the rest. There are strict income and asset guidelines that must be met to be eligible for Medicaid coverage.
Legally speaking, any transfer of assets for less than fair market value (i.e., a gift) may subject you to a lengthy period of Medicaid ineligibility under a complex and confusing web of Medicaid regulations. This is commonly referred to as "the look-back period". Nevertheless, as with most areas of life, proper planning is rewarded and the failure to plan is not. Through proper Medicaid planning, you may be able to legally qualify for Medicaid and protect your assets for yourself now and your loved ones later.
If you are in good health and can pay the premiums, long-term care insurance (LTC or LTCI) is another means of paying for your care. In addition, long-term care insurance is sometimes used in conjunction with Medicaid legal planning to pay for care during any period of potential ineligibility.
You may not be willing to admit that you might become incapacitated and perhaps need expensive long-term care in the future. However, denial is not a strategy and there is no time like the present to plan. A debilitating illness or injury could strike any of us at any time. When you are ready to explore your options, contact us to schedule an Estate Planning Strategy Session.