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Q: When should I start planning my estate? What documents are required?
A: Estate planning is a continuous process that starts at age 18, after which parents can no longer legally make decisions for children. Often young adults don’t have children or significant financial assets, so worrying about preserving or transferring assets is not as much of an issue as making sure that someone can make healthcare and financial decisions for them in the event they have an incapacitating medical event.
The documents everyone should have are a Last Will and Testament, a Healthcare Power of Attorney (POA) and Advance Directive and a Financial Power of Attorney. POAs are written instruments where you appoint someone to make medical or financial decisions when you lack the capacity to do so. The purpose is to allow continuity of decision-making and to avoid the need to go to court to get a legal guardian appointed. If you haven’t named someone in a validly executed POA, the law doesn’t allow your spouse or children to access funds in your name alone. While some medical decisions can be made by close blood relatives without a healthcare POA, problems often arise with children of different marriages and a spouse that is not the biological parent of those children. Expressing your wishes in writing minimizes potential conflicts.
A Last Will does not grant authority over your assets while you are alive and a POA does not grant authority over assets after you die. A Last Will and/or a Trust detail who you want to benefit from your legacy, who is responsible for carrying out your wishes, and how the funds are to be disbursed. There can be incentive clauses and protective clauses to protect beneficiaries from creditors or their own poor decision-making. Provisions can also be added to protect disabled beneficiaries.
Q: When planning my estate, how should I take costs of long-term care into consideration? How can I protect my estate should I become mentally incapacitated or suffer from neuro-cognitive impairment?
A: For families with a total estate of less than $10.5 million, the big issue is the cost of long-term care. Fifty percent of people over the age of 85 suffer from some level of cognitive impairment. Combined with the normal physical effects of aging, most people will need some type of long-term care in their life.
There are tools that people can use to minimize the damage to their estate from long term care costs. Some people plan ahead by doing a prospective asset protection plan. This is most helpful for people with assets amounting to $750,000 or higher. Some wait until the crisis occurs when Crisis Medicaid Planning is done (most beneficial for people with more modest asset levels). When doing this type of planning, you must consider the desires of the individual regarding the type of care, location of the care, funding sources, potential Medicaid or Veterans’ Benefits, family resources and ability to support the loved one in the community and the family dynamic to determine what is practical versus what is desired.
Q: My father is elderly and didn’t have a will or elderly care provisions established. His mental state is in question. What are the options? Can I use a Power of Attorney to ensure that care is in their best interests, even if it goes against his original written wishes?
A: While people with mild dementia often can comprehend and execute a Power of Attorney (POA), that may or may not be beneficial. I first try to assess the family situation, as the well meaning relative may be up against a fractured family. This increases the risk that the POA may be challenged down the road. An older adult that vacillates between cooperation and agitation is often not a good candidate. A person with mild impairment who is consistently cooperative and compliant (and understands that he needs help and is willing to accept it) is a good candidate for a POA.
Even though you may have been appointed as agent for your father, it does not mean he gives up his right to make decisions, even bad ones, until a judge takes away that ability.
When the POA is not a workable option, you will need to seek a guardian, who is appointed by a judge after there is a determination that the individual no longer has the capacity to make safe decisions regarding healthcare or finances. A guardianship can be plenary (total) or limited in nature; emergent, if the person is at imminent risk; uncontested or contested. A guardian will have far more restrictions regarding what they can do with the incapacitated person’s finances and will need court approval to sell their home, get them divorced or to perform a number of other functions.
Q: My siblings and I don’t agree on what is best for our parent(s). How do we settle the dispute in the best interest of our parent(s)? What is the difference between a guardian, conservator and an appointed Power of Attorney?
A: Talking is always better than litigating. Get everyone together, preferably in a neutral place. If your parents can participate in the discussion, they should.
If the parties cannot come to an agreement, most counties have elder mediation programs to try to come to a non-judicial resolution. If the parties cannot come to an agreement and the parent at is unable to make the final decision due to cognitive impairment, a proceeding to have a guardian appointed for the parent is the last resort. A guardian is appointed by a judge after there is a determination that the individual no longer has the capacity to make safe decisions regarding their healthcare or finances (see more above regarding guardians).
A Power of Attorney (POA) is a voluntary document and can be revoked by the person who appointed the agent. A guardianship is an involuntary court proceeding and the judge’s appointment can only be modified by the court. A guardianship can be of the person, the property or both. Pennsylvania does not have conservators.
Q: What costs do I need to take into consideration when considering long-term health care in general? Does Medicaid help? What about social security?
When planning for long term care costs (as opposed to general healthcare costs in retirement which are substantial as well), you must consider the cost of someone caring for you when you need assistance performing everyday activities like eating, bathing, dressing and using the toilet. There are numerous ways to receive that care. It can be provided in the home, by companions or aides. It can be in a personal care facility, which can provide very limited to very significant assistance. It can be provided in a nursing home that houses the most fragile residents, has the highest staffing ratio by law and requires around the clock nursing care provided by Registered Nurses. It can also be provided at an adult day center, which also provides nursing and a high level of care.
The cost of home care varies widely, up to 50 percent, from low need to high need residents. Home care in Southeastern Pennsylvania usually runs $22-25 per hour, from licensed home care agencies; personal care home from around $3,500 to $8,500 per month; and $10,000 to $15,000 per month for nursing homes.
Unless you have long term care insurance, it is likely you will be paying out of pocket. Home care and nursing homes are eligible for Medicaid and Medicaid Waiver for those who qualify. Medicaid requires that you qualify both clinically and financially (you need to have very few assets). Medicaid (Waiver) will pay for nursing care or similar services (although not 24/7 care) in the home, if it is safe.
Medicare will pay for up to 100 days of rehabilitation services in a nursing home if it is related to a Medicare covered illness. Medicare will not pay for nursing if you are there because you need help performing your activities of daily living. Social Security will not pay for long-term care.
With proper assistance, you can preserve assets for your spouse and loved ones.
Robert Slutsky Associates
600 W. Germantown Pike, Suite 400
Plymouth Meeting, PA 19462
101 Lindenwood Drive, Suite 225
Malvern, PA 19335
150 N. Radnor Chester Road, Suite F-200
Radnor, PA 19087