Are You Considering All The Risks?
Estate planning isn’t for the faint of heart, or the uninformed. Although it may be perceived as the preparation of a SIMPLE Will and many individuals will try to do their planning using internet resources; is it really that simple?
All the clients who visit our estate planning clinic are over 60 years of age and they have limited assets. Most of them really have not thought about funding their long-term care costs and for many of them, the reality is that Medicaid will be the funding source.
In Michigan, the average cost of long-term care is just north of $8,000 each month. And statistics will bear out that the average length of stay for individuals with chronic conditions in nursing homes can easily exceed 30 months. If you reach the age of 65, there is about a 2/3 chance that you will see institutional care before you die. That means that $240,000 expenditure for a 65 year old should be a planning consideration before they die for possible institutional care in a nursing home.
As you counsel your clients about the transfer of their property at death, do you also tell them to consider deducting this amount from their estate? Are you discussing these possible outcomes and how Medicaid, not Medicare, will most likely be the source of funding for that care if they meet the qualifications for Medicaid?
Seemingly innocuous actions like placing a son or daughter on the deed to your house or placing your home in a living trust may have unintended consequences. This is particularly true if you have a modest estate. Doing your own Will or failing to understand planning options may cost you thousands of dollars.
This is an area of law which is often overlooked and couseling regarding possible options missing when estate plans are drawn. For that reason, it is best not to rely on general advice, like “everyone needs a living trust” without seeking legal guidance that is tailored to each individual’s specific circumstances. And that is best accomplished by meeting with an attorney who is familiar with Medicaid and Medicare. Many are not. Going on your own leaves you susceptible to significant and unintended consequences later on.
What good is it to have a Will that you drafted to insure that your children share your estate if everything is gone to provide care that Medicaid would have funded, but for your ill-advised self-lawyering, that resulted in the depletion of your estate before your death?
When it comes to paying for long-term care costs in a nursing home, most clients will think that Medicare will cover those costs or they have no idea how expensive that care will be. Or, they will be of the opinion that they will never see the inside of a nursing home and instruct all of their children never to place them in a nursing home. The problem with that command is, that often, the family will have no choice when you have a family member who wanders at all hours of the day and night. Or, you find that the family member is unable to get around and there is no one to help lift or transfer them – much less clean them up after toileting. And, how many of a parent’s children will be available to give 24 hour care for a parent to remain in their own home?
A detailed analysis of nursing home populations by state, gender, level of care and types of facilities can be found at the Department of Health and Human Services Nursing Home Data Compendium for 2014. As you read it you will find that, on average, 388 days of care in institutional environments might be anticipated for all occupants. However, those which chronic conditions like Alzheimer’s type dementia, diabetes, vascular dementia and other long term debilitating conditions have stays that are significantly longer, some as long as ten years. For that group, I recommend planning for 30 months of care in that setting. And those populations are mostly male with more than two female residents for every male.
From Long-Term Care Services in the United States: 2013 Overview (cited below)
The number of people using nursing facilities, alternative residential care places, or home care services is projected to increase from 15 million in 2000 to 27 million in 2050. Most of this increase will be due to growth in the older adult population who need such services (HHS, 2003). Although people of all ages may need long-term care services, the risk of needing these services increases with age. Recent projections estimate that over two-thirds of individuals who reach age 65 will need long-term care services during their lifetime (Kemper, Komisar, & Alecxih, 2005–2006). Largely due to aging baby boomers, the population is expected to become much older, with the number of Americans over age 65 projected to more than double, from 40.2 million in 2010 to 88.5 million in 2050 (Vincent & Velkoff, 2010). The estimated increase in the number of the “oldest old”—those aged 85 and over—is even more striking. The oldest old are projected to almost triple, from 6.3 million in 2015 to 17.9 million in 2050, accounting for 4.5% of the total population (U.S. Census Bureau, 2012) (emphasis added) http://www.cdc.gov/nchs/data/nsltcp/long_term_care_services_2013.pdf
There is a great deal of ignorance about what you can or cannot do with your resources if you wish to qualify and the rules are not intuitive. You need someone with expertise in that area of the law as they can save you thousands of dollars in your planning. And the cost of their services will be easily offset by the savings in most instances.
If you graduated from law school and are looking for a specialty, this is a good one. But it isn’t an area of law that you can pick up overnight. It takes time to learn the rules, but once you understand them it will put you in position to avoid malpractice and to serve clients who come to you with the kind of problem that lawyers find very appealing – they have money and need to know what to do with it to avoid losing most of it for nursing home expenditures.
The best way to learn about this area of law is to work with an expert in your area as associate counsel. Attend continuing legal education seminars and read as much as you can about this area of the law. Make sure you align with someone who does a lot of this type of work and specializes in it until you feel you are competent to do it. Even if you don’t specialize in this area of the law, you owe it to your clients to be conversant in the fundamentals of Medicaid planning to avoid malpractice when it comes to estate planning and property transfer considerations. You may also want to associate with a Medicaid/Medicare planning attorney to review your estate planning recommendations before you take steps that are detrimental to your clients.
Later in this series, I will publish a blog, Medicaid Risk Analysis to help you better understand those who are most susceptible to dependency on resources through Medicaid. Subscribe to this blog and you will get an automatic alert for that blog and my other posts.