By Brian Andrew Tully, JD, CELA
A comprehensive estate plan should encompass, at a minimum, the client’s legal, financial, and incapacity concerns. I believe, however, that most of us focus more on the legal and financial aspects of estate planning than on incapacity concerns. The realities of aging require that we give our clients greater attention and guidance about their long-term healthcare needs. The Alzheimer’s Association estimates that one in three seniors will die with cognitive decline resulting from Alzheimer’s disease or some form of dementia. The Family Caregiver Alliance reports that an additional one in three of us will have substantial long-term care needs, which means that we will need functional assistance with three or more activities of daily living.
Considering that the Tax Policy Center reports that less than 0.1 percent of Americans will pay an estate tax, planning for the aging and elder care realities of our clients is of equal if not greater practical concern than planning for their financial and legal issues—and will be even more beneficial to the vast majority of our clients. Fortunately, these options are not mutually exclusive, and we can enhance our estate planning practices by adding elder care planning and advocacy services.
We all know the typical benefits of estate planning: minimizing taxation, avoiding probate, establishing family trusts that benefit generations, and protecting our clients’ wealth from the risks of divorce, addiction, disability, and misuse. These are all critical goals, and every adult should have a comprehensive estate plan in place before they pass away. However, exploring the client’s needs and what could happen to the client between implementation of their estate plan and the date of their passing allows us to address the reality of aging. Do we truly believe that our client’s extensive irrevocable defective grantor trust plan will be the first thing on their mind when they receive a diagnosis of Parkinson’s disease? They are much more likely to be concerned with the care they will need as their condition progresses. Therefore, every estate plan we draft—both those designed to minimize taxation for generations and those that simply leave the family home to the children—must address elder care–related concerns and needs.
The U.S. Department of Health and Human Services combines both the cognitive and functional realities of aging in stating that there is a 70 percent chance of needing long-term care if you are over sixty-five years of age. That is a significant number of people who will need help due to a decline in their physical or mental capabilities. Unfortunately, these people are members of our own family—perhaps even ourselves. The fact that a significant number of us will need elder care means one thing: we need to help our clients plan not only their estates but also their future care.
I have been helping families plan their estates and their care for over twenty-five years. I can attest that clients who fail to keep aging and elder care in sight, focusing solely on the estate plan and what occurs at death, may be stricken by an elder care crisis that not only impacts their physical and cognitive abilities or those of a loved one but also increases the strain on family dynamics. In addition, the financial impact for some clients will be devastating: home care in New York, for example, can be as high as $12,000 per month, and nursing facility care can reach $20,000 per month. Elder care will always be stressful, emotional, and expensive, but clients who plan for that scenario will be more likely to avoid both a care and financial crisis.
The estate plans that we implement each day do not entirely ignore the possibility of cognitive and functional decline because we draft expanded durable powers of attorney and healthcare advance directives. These documents are essential to ensure that clients have back-up decision-makers, but they do not address the actual financial or care needs of aging individuals. Elder care should be an integral part of the estate plans we draft because it could have a greater impact on our clients’ financial assets than taxes or probate costs. For example, a ten-year battle with Alzheimer’s disease may impact a client’s family as much as the death of the family patriarch and business founder. As such, in order to properly complete our clients’ estate plans, we need to address the following elder care topics during our estate planning consultations.
Two Types of Care
Two types of care are needed as we age: medical care and long-term care. Medical care involves doctors, hospitals, and rehabilitation centers, and its cost is generally covered by medical insurance or Medicare. Long-term care is required when a client needs assistance with either functional needs—also referred to as the activities of daily living, such as walking, bathing, and toileting—or cognitive needs, also called the instrumental activities of daily living, which include mental processing tasks such as paying bills, shopping, driving, and cooking. This nonmedical, long-term care is at the heart of elder care law. Importantly, Medicare does not pay for long-term care, and clients need to understand that.
Long-Term Care Setting
It is also important to address where a client will receive long-term care. Long-term care is provided in various residential settings depending on the level of care the client needs. For example, will the client be able to receive the needed care in their home? Or in their child’s home? Will the client be able to reside in and afford an assisted living facility or a continuing care retirement community? Perhaps the client’s needs will be significant, and a nursing home will be the safest setting. This issue cannot be resolved before the need arises, but it is important to share relevant information about these options and levels of care with clients because each of them have different costs and criteria for admission.
Paying for Long-Term Care
Because Medicare does not pay for long-term care, how will the client pay for the long-term care they need in the desired or required setting? There are three ways to pay for long-term care . . .
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