Why You Need a Plan for Long-Term Care – Annapolis and Towson Estate Planning

Boomers are more willing to plan their own funerals than to prepare for an extended stay in a nursing home. Both are inevitable events for most of us.

With more than 10,000 people celebrating their 65th birthday every day in America and the startling statistic that 70% of us will need long-term care at some point during our lifetimes, it would make sense that more of us would be planning for long-term care. And yet, boomers seem to be more comfortable making plans for a memorial service than they do for a nursing home visit. The cost of long-term care is big and it’s not covered by Medicare. Surprised? So are families when the bill comes.

The Motley Fool’s recent article, “Baby Boomers Are More Prepared for Death Than Life,” says most baby boomers are either unprepared or haven’t planned for a long-term care expense, according to a Bankers Life survey of 1,500 middle-income Americans aged 54 to 72. The results show that baby boomers were more likely to plan for their own death than to have a long-term care plan. About 81% made some kind of funeral arrangements for when they pass away, but just 32% have a plan for how they’ll get care in retirement. The lack of long-term care planning is a significant issue when you compound this with the harm that such a huge unexpected expense has on a person’s retirement savings, especially in cases where a nest egg is small to begin with.

The Department of Health and Human Services believes that the average total cost of care for a retiree is $138,000. However, 79% of the respondents said they have set no money aside for their retirement care needs. For those who do have long-term care savings, the median amount saved is a mere $40,000. Nonetheless, 67% of those surveyed said they know someone who required care in retirement and 36% said they can’t rely as much on friends or family for around-the-clock care. Given all these negative numbers, why aren’t more boomers better prepared? The article gives us three surprising reasons that contribute to this lack of awareness and lack in savings for long-term care:

  1. Overconfidence. Boomers may overestimate their ability to manage future long-term care costs. Three-fourths of those surveyed by Bankers Life said they were confident in their ability to handle future healthcare costs. A misplaced confidence could be why boomers used more effort and money to plan for their deaths. About half of the respondents had fewer than $5,000 saved in an emergency fund and 33% had fewer than $1,000 set aside for emergencies. With the high cost of long-term care and the collective weakness in emergency funds, boomers’ confidence in being able to manage long-term care costs appears unrealistic. These people may be relying on Social Security benefits and Medicare too much.
  2. Lack of basic Medicare understanding. Medicare covers only some long-term care expenses like skilled nursing care after a hospital stay, but there are limits. It also doesn’t pay for custodial or home healthcare. Most of those surveyed believe that Medicare will pay for a future healthcare event and 56% mistakenly identified Medicare as a source to pay for future long-term care.
  3. Not knowing where to get advice. The greatest obstacle to planning for care in retirement is a lack of trust. About a third of boomers surveyed said they need and want advice but don’t know whom to trust. Most seek the help of a family member (36%) and just only 7% ask a health professional. A lack of trust or willingness to seek professional help may lead boomers to either put off a decision or perhaps not fully understanding their planning options.

If you don’t have a long-term care insurance policy in place, the time to get started is now. If your retirement savings accounts can handle it, figure about $138,000 for a nursing home stay. Add in a long-term care insurance policy with premiums that you can manage as another layer of protection. It is better to have a small policy than none at all.

Reference: The Motley Fool (March 27, 2019) “Baby Boomers Are More Prepared for Death Than Life”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Make the Most of Beneficiary Designations – Annapolis and Towson Estate Planning

There’s an easy way for select assets to be passed to heirs, with no need for probate. It’s called the beneficiary designation.

Your will is a document that is used to pass property and assets to your heirs, but it’s not the only way.

Certain accounts or assets have beneficiary designations, where you provide instructions on who is to receive assets when you die. Most people don’t realize that the beneficiary designation is more powerful than the will, and directions in a will are overruled by the beneficiary designation.

Kiplinger’s recent article, “Beneficiary Designations: 5 Critical Mistakes to Avoid,” explains that assets including life insurance, annuities, and retirement accounts (think 401(k)s, IRAs, 403bs and similar accounts) all pass by beneficiary designation. Many financial companies also let you name beneficiaries on non-retirement accounts, known as TOD (transfer on death) or POD (pay on death) accounts.

Naming a beneficiary can be a good way to make certain your family will get assets directly. However, these beneficiary designations can also cause a host of problems. Make sure that your beneficiary designations are properly completed and given to the financial company, because mistakes can be costly. The article looks at five critical mistakes to avoid when dealing with your beneficiary designations:

  1. Failing to name a beneficiary. Many people never name a beneficiary for retirement accounts or life insurance. If you don’t name a beneficiary for life insurance or retirement accounts, the financial company has it owns rules about where the assets will go after you die. For life insurance, the proceeds will usually be paid to your estate. For retirement benefits, if you’re married, your spouse will most likely get the assets. If you’re single, the retirement account will likely be paid to your estate, which has negative tax ramifications. When an estate is the beneficiary of a retirement account, the assets must be paid out of the retirement account within five years of death. This means an acceleration of the deferred income tax—which must be paid earlier, than would have otherwise been necessary.
  2. Failing to consider special circumstances. Not every person should receive an asset directly. These are people like minors, those with specials needs, or people who can’t manage assets or who have creditor issues. Minor children aren’t legally competent, so they can’t claim the assets. A court-appointed conservator will claim and manage the money, until the minor turns 18. Those with special needs who get assets directly, will lose government benefits because once they receive the inheritance directly, they’ll own too many assets to qualify. People with financial issues or creditor problems can lose the asset through mismanagement or debts. Ask your attorney about creating a trust to be named as the beneficiary.
  3. Designating the wrong beneficiary. Sometimes a person will complete beneficiary designation forms incorrectly. For example, there can be multiple people in a family with similar names, and the beneficiary designation form may not be specific. People also change their names in marriage or divorce. Assets owners can also assume a person’s legal name that can later be incorrect. These mistakes can result in delays in payouts, and in a worst-case scenario of two people with similar names, can mean litigation.
  4. Failing to update your beneficiaries. Since there are life changes, make sure your beneficiary designations are updated on a regular basis.
  5. Failing to review beneficiary designations with your attorney. Beneficiary designations are part of your overall financial and estate plan. Speak with your estate planning attorney to determine the best approach for your specific situation.

Consider the beneficiary designation as part of your estate plan, and you’ll get the full picture of the power of a beneficiary designation. Just as you need to review and update your will to keep up with changes in your life and the law, you also need to update your beneficiary designations.

Reference: Kiplinger (April 5, 2019) “Beneficiary Designations: 5 Critical Mistakes to Avoid”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Legitimate Power of Attorney Use Leaves Widow Impoverished – Annapolis and Towson Estate Planning

This is a cautionary tale about what can happen, when the wrong person is given power of attorney. The problem here is that a man changed his power of attorney without any review or oversight from any family members, including his own wife.

Why Dorothy Jorgenson’s husband changed his power of attorney just days before his death, is something that only he and the relative he named will ever know. However, the relative acted fast and took more than $70,000 from the couple’s joint bank account, says WPRI.com in the article, “Son questions power of attorney after mother’s bank account is drained.”

“When I went to pick up a prescription for my mother, there was insufficient funds to pick up a prescription,” Dorothy’s son, Gene Weston, said. “I can’t believe that someone would do that to an elderly woman.”

The couple had been married for almost twenty years. Both had added money to the account.

“My mother is still alive, and my mother needs to continue living,” Weston said.

The son called the police, because he claims there’s no way the power of attorney document for his stepfather was legitimate.

“He was on morphine at the time,” Gene Weston said.

According to a local police report, detectives interviewed several people and found Jorgensen’s husband was “only taking a minimal dose of meds.”

Police determined that Mr. Jorgensen “acted with his own free will” and ended their criminal investigation. However, these types of cases involving powers of attorney, often wind up in civil court. When people make a change to a power of attorney right before their death, it can raise concerns, especially when the person is elderly and on medication.

One thing that many people don’t know, is that they can limit the power of attorney document to protect a surviving spouse or family members.

It’s important to carefully choose an agent and make certain that the power of attorney is properly notarized. You should select a person whom you trust, and whom you know will do the right thing for you, in case you can’t make your own decisions.

Despite her actions, the relative who withdrew the money maintains her innocence.

Reference: WPRI 12 (April 15, 2019) “Son questions power of attorney after mother’s bank account is drained”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Congress Recognizing Need to Help Those with Early Onset Alzheimer’s – Annapolis and Towson Estate Planning

A hearing of the Senate Special Committee on aging is looking at bipartisan legislation that would make changes to the Older Americans Act to give individuals younger than 60 with a diagnosis of early-onset Alzheimer’s a chance to access support programs.

Senate Bill 901, which is called “Younger-Onset Alzheimer’s Disease Act” was introduced in late March by a number of Senators who crossed party lines to support the amendment to the Older Americans Act. According to McKnight’s Senior Living’s article, “Bill would aid those with younger-onset Alzheimer’s disease,” Senate Bill 901 was introduced by Senator Susan Collins (R-ME), chairman of the committee, Senator Bob Casey, ranking member and Senators Doug Jones (D-AL) and Shelley Moore Capito (R-WV). In the House of Representatives, the bill H.R. 1903 introduced was introduced by Representatives Kathleen Rice (D-NY), Pete King (R-NY), David Trone (D-MD), Elise Stefanik (R-NY), Maxine Waters (D-CA), and Chris Smith (R-NJ).

Nutritional programs, supportive services, transportation, legal services, elder-abuse prevention and caregiver support have been available through the OAA since 1965. However, under the current law, only individuals over 60 are eligible.

“These programs would make a huge difference in the lives of individuals living with younger-onset Alzheimer’s disease, who don’t have support services available to them,” said hearing witness Mary Dysart Hartt of Hampden, ME, a caregiver to her husband, Mike, who has young-onset Alzheimer’s.

About 200,000 individuals aged less than 65 have younger-onset Alzheimer’s disease, according to hearing witness Clay Jacobs, executive director of the Greater Pennsylvania Chapter of the Alzheimer’s Association, North Abington Township, PA.

“The need to reach everyone affected will grow significantly in the coming years,” he said.

Senator Collins was a founder and co-chair of the Congressional Task Force on Alzheimer’s Disease. She noted that she and Casey are leading this year’s OAA reauthorization efforts.

Senator Collins said she was also introducing the “Lifespan Respite Care Act” with Senator Tammy Baldwin (D-WI) Tuesday “to help communities and states provide respite care for families.” This legislation would earmark $20 million for fiscal year 2020, with funding increasing by $10 million annually to reach $60 million for fiscal year 2024. The program lets full-time caregivers take a temporary break from their responsibilities of caring for aging or disabled family members.

For family caregivers, which included Senator Collin’s own mother, the greatest need is for respite care. Many Americans take on the task of caring for a loved one, sacrificing their own lives and sometimes their careers. Making respite care for caregivers a national priority, would be a great help to communities nationwide.

Reference: McKnight’s Senior Living (April 3, 2019) “Bill would aid those with younger-onset Alzheimer’s disease”

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

Read more about the article Here’s Why You Need an Estate Plan

Here’s Why You Need an Estate Plan

It’s always the right time to do your estate planning, but it’s most critical when you have beneficiaries who are minors or with special needs, says the Capital Press in the recent article, “Ag Finance: Why you need to do estate planning.”

While it’s likely that most adult children can work things out, even if it’s costly and time-consuming in probate, minor young children must have protections in place. Wills are frequently written, so the estate goes to the child when he reaches age 18. However, few teens can manage big property at that age. A trust can help, by directing that the property will be held for him by a trustee or executor until a set age, like 25 or 30.

Probate is the default process to administer an estate after someone’s death, when a will or other documents are presented in court and an executor is appointed to manage it. It also gives creditors a chance to present claims for money owed to them. Distribution of assets will occur only after all proper notices have been issued, and all outstanding bills have been paid.

Probate can be expensive. However, wise estate planning can help most families avoid this and ensure the transition of wealth and property in a smooth manner. Talk to an experienced estate planning attorney about establishing a trust. Farmers can name themselves as the beneficiaries during their lifetime, and instruct to whom it will pass after their death. A living trust can be amended or revoked at any time, if circumstances change.

The title of the farm is transferred to the trust with the farm’s former owner as trustee. With a trust, it makes it easier to avoid probate because nothing’s in his name, and the property can transition to the beneficiaries without having to go to court. Living trusts also help in the event of incapacity or a disease, like Alzheimer’s, to avoid conservatorship (guardianship of an adult who loses capacity). It can also help to decrease capital gains taxes, since the property transfers before their death.

If you have several children, but only two work with you on the farm, an attorney can help you with how to divide an estate that is land rich and cash poor.

Reference: Capital Press (December 20, 2018) “Ag Finance: Why you need to do estate planning”