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The biggest reason to do Elder Law planning is to protect yourselves and your family. Most people (70%, according to the U.S. Department of Health and Human Services) will need long-term care at some point in their lives, and the cost of that care often wipes out their entire life savings.
Imagine: you have no money, but you still need long-term care, maybe for years, and you still have living expenses. How will you pay for everything? Fortunately, especially in New York, there are ways you can protect against that happening, using proper legal methods.
The risk of spending all your money on long-term care also threatens the financial well-being of your spouse and family. Here’s an example of what can happen:
Howard, 81, and Susan, 78, have a house worth $300,000 that they bought 30 years ago, and they have $100,000 in savings. They live off their Social Security and other retirement income with little to spare. Howard has a mild stroke, and because he’s too heavy for Jane to manage, he needs an aide to help him with several of his activities of daily living. They get an aide 5 hours a day, at $22 per hour. They need the aide on the weekend, too, because – guess what? – activities of daily living occur every day. That’s $770 extra per week they’re paying or $40,040 per year that they didn’t plan for.
By scrimping to pay some of the costs of the care from their current income, they make their $100,000 of savings last for four years. Now they are 85 and 82 – and they have no savings at all, and no money besides their monthly income. Howard could (and will probably need to) access Medicaid, but there are complications to that. Among other issues, they’ll have to figure out how to protect their income, since unless they do some Elder Law planning, Medicaid may require that they pay every penny of Howard’s income over $862 per month toward the cost of his care.
Even if they learn how to protect their income, they won’t be able to make a large purchase (like a new rug, or a new roof for the house), because they have no savings left. Howard and Susan may have to depend on their children to buy things for them. That means their children will be spending their money on their parents, instead of saving for their own retirements. And at 85 and 82, Howard and Susan could easily live another ten years or more. Their children hope they do, but it is a financial burden.
In addition, Medicaid will keep track of how much they spend on Howard, and they may make a claim for some or all of the amount they spent caring for Howard against the equity in the house, once Howard and Susan are no longer living there. If Howard passes away and Susan moves to a retirement facility, she may not get to keep the full value of the house. Her finances will have been drained by caring for Howard.
Susan may very well not be left with enough money to pay for herself at the point where she needs long-term care. For any married couple, does either want to leave the other in a vulnerable financial position because of the cost of care for the first ill spouse? That’s what can and does happen – but with Elder Law planning, the “well spouse” can be protected.
Elder Law planning helps you avoid the financial catastrophe and burden on your children that your long-term care needs can cause. That’s another powerful reason to find out about your options.
So how does it work – what are the steps?
- Find out where you stand and make a plan
- Start with a consultation with a respected and competent Elder Law attorney. Medicaid consultants cannot give you legal advice – and legal advice is a key component of whatever plan you put in place. A lawyer can review the documents you have in place, to see whether they are valid and have the proper scope. A Power of Attorney (POA) and a Health Care Proxy would be reviewed if you have them.
- The consultation should result in a plan for the next steps you need to take. You may need an updated POA, for example – the form changed significantly almost ten years ago.
- The consultation will probably also result in some recommendations about how best to protect your money and assets. A trust, Pooled Income trust, or Medicaid application may be among the recommendations.
- Protect yourself and your loved ones
- Your next steps are to implement the recommendations. The goal is not to “hide” your money from anyone. The goal is to make your money last as long as possible while you are alive – to help keep you in your home and as comfortable as possible, as long as possible.
- If you end up taking steps to protect your assets and your home, you are also protecting your wife or husband, and you have taken the potential financial burden of paying for your care off of your children.
- Gain peace of mind
- By planning ahead, you will know that you have taken the proper steps to protect yourself and your loved ones. That can be enormously gratifying, and ease your worries about what might be coming down the road as you age.
CONCLUSION: Seniors are living longer and longer. Many health problems that used to kill people, such as cancer, diabetes, or heart failure, can now be treated for decades as a chronic condition. Unfortunately, the medical costs of long-term care have far outstripped most people’s ability to pay for them. Accessing government assistance such as Medicaid to pay for your care, while your assets can be used to pay your living expenses, can enable you to have the best quality of life possible, for as long as possible. It also protects your spouse, who may need expensive care for himself or herself in the future, and it eliminates or at least eases the financial burden on your children.