Consumers Guide for Legal Issues to Consider As We Age
Elders and disabled individuals of any age face a number of distinct legal problems. It is important to think ahead to ensure “all your ducks are in a row.” Issues that should be considered include the following:
1) Wills – A will allows for disposition of your property at your death. The process of paying final bills and distributing assets of the estate is called probate. If you do not have a will, your property will pass according to the laws off descent and distribution of the state in which you live, which may not be where you would like your assets to go. Preparing a will allows you to decide to whom property will pass and in what amounts. It allows you to: designate who you want as executor, who to appoint as guardian for your minor or disabled child; provide for a spouse from a second marriage while ensuring that your remaining assets will ultimately pass to your children; save on estate taxes. A will can also include trust provisions designed to maintain public benefits and care for disabled children or parents. Absent such provisions, the child or parent can lose Medicaid and other public benefits.
2) Trusts – Depending on the particular state, a revocable living trust may be advisable in order to transfer assets while avoiding probate. A revocable living trust acts much like a will in distributing assets, but without the necessity of probate. In some states, the attorney handling the probate is paid a fixed percentage of the estate, regardless of the amount of work completed. In those states, establishing the trust to avoid probate is usually worth the money. In other states, such as Colorado, probate is simplified and attorneys are paid on an hourly basis. Probate in such states is not to be feared and is often less expensive than the fees associated with establishing a revocable living trust.
3) Other Probate Avoidance Devises
a) Joint Tenancy – joint tenancy interests pass automatically at death to the surviving co-owner(s). Although it avoids probate, it often leads to unintended results (e.g., other joint tenant can remove funds at any time; other children are disinherited because assets only pass to the named joint owner; may be difficult to remove them once added to the account, etc.).
b) “POD” or “TOD” Accounts (“Payable on Death” or “Transfer on Death”). With these accounts, whatever is left in the account at death, if anything, passes to the individual(s) named on the POD account. There is no need to probate and it avoids problems associated with joint tenancy. However, it may not cover situations where you would work to provide for grandchildren, if the designated POD beneficiary predates you.
c) Beneficiary designations -will control regardless of the terms of the will, so it is always important to ensure that they are up to date (including naming contingent beneficiaries). Usually found in life insurance policies, annuities, IRAs, 401ks and other retirement assets.
4) Durable Powers of Attorney – a written document authorizing a trusted individual (the agent) to deal with financial and medical issues when you are unable to do so. Durable Powers of Attorney can be immediately effective (a “standing POA”) or effective only upon disability (a “springing” POA). A standing POA authorizes an individual to act on your behalf even when you are not incapacitated. By appointing the agent, the individual is not giving up his or her authority; he or she is only “deputizing” someone to act on their behalf. An agent can be fired by the individual at any time.
a) Financial Power of Attorney – addresses financial issues, such as making payments, signing checks, dealing with real estate, banking, insurance, tax and other financial issues. If you do not have one and become incapacitated, someone may have to go to court to obtain a conservatorship, which can be costly and time-consuming.
b) Medical Durable Power of Attorney – addresses medical issues, including access to medical records, consent to medical care and treatment, surgical procedures, diagnostic procedures, medication, the use or removal of life support, etc. If you do not have one and become unable to communicate, someone may have to go to court to obtain a guardianship, which is also costly and time consuming.
c) Living Wills – A written document that allows you to state, in advance, your wishes regarding the withdrawal or withholding of life-sustaining procedures. Vary among states, but Colorado’s relates only to terminal conditions certified by two physicians – have become less important inasmuch as medical durable powers of attorney can cover the same conditions and more.
d) CPR Directives – Documents directing care providers and emergency personnel not to perform CPR. Usually only available from the physician. It can be revoked at any time.
5) Long-Term Care Planning – Most people do not realize that Medicare will not pay for assisted living or nursing home care. Average cost of care in a Denver, Colorado nursing home is approximately $10,000 – $11,000/month. Options for paying for such care include: private payment, VA Aid & Attendance benefits, Medicaid and long-term care insurance.
a) VA Benefits – Provides up to about $2,200 in cash benefits to help pay for in-home or assisted living care. Available to veterans who served at least 90 days, 1 of which was during a period of wartime, with “countable assets” (almost everything other than a house, car, personal possessions) of less than $126,000 and medical expenses in excess of income.
b) Medicaid Benefits – safety net for most people. If qualified, will cover all expenses in the nursing home, assisted living facility, and some in-home care. In Colorado, applicant’s monthly income cannot exceed $9,854 (Denver Metro Area), and cannot have more than $2,000 in countable assets for a single individual or more than $137,000 for a married couple. Do not count home, auto, personal property, prepaid irrevocable burial/funeral plans, medical equipment against the maximum. If an individual has assets in excess of $2,000/$137,000, there are many legal options available for preserving all or a portion of the excess assets.
c) Long-Term Care Insurance – Long-term care insurance is becoming an important element in income and asset protection/preservation planning. If you are fortunate enough to have this type of coverage, it may go a long way toward paying the costs of a nursing home. Policies are usually issued for a specific number of years of coverage, and depending on the particular policy, may provide coverage for services in addition to nursing home care, such as for home health care, adult day care, assisted living, respite care, etc. As with any insurance policy, the premium costs are related to variables such as age, the term, deductibles, policy limits, benefits, etc. If investigating this area, make sure to use a reputable broker who, preferably, represents a broad line of financially strong insurance companies, and who is certified. Certifications include those provided by the non-profit Health Insurance Association and American Association for Long-Term Care Insurance (“LTCP”); the Corporation for Long Term Care Certification (“CLTC”) and the Society of Certified Senior Advisors (“CSA”). You can also check with the state insurance commissioner. Note that this insurance is very difficult to obtain or prohibitively expensive if the applicant is in a medical crisis situation or is already suffering from dementia or other illness. Individuals should therefore plan well in advance to take advantage of this opportunity to protect and preserve income and assets. Unfortunately, most people facing a nursing home stay do not have this coverage.
6) Final Arrangements – We are all going to die and someone needs to make the final arrangements. You can relieve your loved ones of some of the responsibility/worry by pre-arranging burial/cremation services. This can avoid “over-spending” by grieving family members and ease with the transition. It is always good to talk about your wishes, including details associated with any memorial service.