Elder Care Legal and Financial Considerations
A good elder care plan should address elders' legal and financial situations as well as their care needs. Elder care is expensive. It is possible that all of elders' hard-earned financial resources may need to be sacrificed in order to pay for care. It is also possible (and even likely if elders have a progressive illness like dementia) that elders' mental state will become compromised; that they may lose their right to represent their wishes in a court of law. A little up front planning can, however, yield several methods for preserving elders' hard-earned resources, preserving their wishes for how their assets should be divided upon their death and documenting how their medical care should proceed.
The following legal and financial methods are worth learning about. Only a brief summary of these options is presented here. Family members who are interested in learning more about these methods should consider consulting with a lawyer with experience in estate planning. Once legal or financial documents have been created, it is wise to keep them together in a safe but accessible location that is known to trusted others, such as a safe deposit box, or a lawyer's office.
- Wills and Estate Planning. A will is a legal document that allows a person to specify how their property should be divided and how custody of their children should be handled upon their death. It exists as an alternative to default methods for dividing property and arranging for child custody which are determined by individual states, but which usually involve a lengthy and expensive legal process known as probate which is good to avoid when possible. As part of the estate planning and will process, a person can choose to make trusts or gifts to heirs or charitable organizations, which can be used to reduce the amount of taxes due upon death, as well as making sure that personal wishes are honored.
It is not necessary for a lawyer to be present during the creation of a will. Paralegal professionals can assist with will preparation, and do-it-yourself forms are available in paper or software format from respected publishers. Though legal wills can be created without the assistance of a lawyer, it is a good idea to hire a lawyer to assist with the process, particularly if elders' wishes regarding property division are at all complex, or if there is a desire to minimize tax implications surrounding inheritance issues.
In most areas, wills are not legal until they have been signed in front of a Notary Public (a person who is government authorized to administer oaths and to attest to the authenticity of signatures), as well as multiple witnesses. Multiple copies of the will should be produced and stored in safe places where they can be easily retrieved in the event of elders' death.
- Healthcare Directive. A healthcare directive (also known as a living will or advanced healthcare directive) is a document that enables a person to legally record their wishes concerning whether 'heroic' or extended medical care measures should be taken to prolong their lives in the event they are incapacitated and unable to speak on their own behalf. In order for a healthcare directive to be considered legally valid, the document must be notarized and the person must be of sound mind at the time it is signed. The creation of a healthcare directive document is a good idea for all adults, and not just for elders. Accidents that result in incapacitation may occur at any time, and without such a document in place, it is possible that one's life will be artificially extended against one's will.
A trusted family member or friend can be named as a "healthcare proxy" within the directive document. When this occurs, the document may be known as a durable power of attorney for healthcare. The individual named as proxy in the directive document gains the power to make healthcare decisions on behalf of the person creating the document.
- Conservatorship. A conservatorship is a court arrangement allowing an individual power over the financial affairs of an elder. It is only allowed to exist when an elder (or other individual such as someone in a coma or someone in an advanced stage of Alzheimer's disease) is judged no longer capable of managing their own affairs. Conservatorship works to safeguard the affected person’s financial assets. The court appointed conservator is required to make regular reports to the court regarding expenditures. Special permission may be required before any major financial decisions are made on behalf of the conservatorized individual, including the purchase or sale of assets such as a house. On the downside, conservatorship can be a time consuming, expensive and ineffective process as much as it is also a well meaning and helpful one. The conservator of another person's assets must go before the court to gain permission for big decisions, an expensive lawyer is needed to draw up the papers, and there is always the possibility that the conservator will abuse his or her power over the managed financial assets.
- Durable Power of Attorney for Finance. The durable power of attorney for finance is a legal document that authorizes a person to have the legal authority to act on behalf of another person with specific regard to managing their finances. Should the person on whose behalf the document was created become incapacitated, the normally term-limited document powers remain in effect until the person recovers or dies (at which point the document becomes invalid and the person's will takes over).
The major reason to complete a durable power of attorney for finance is to make sure that important payments can still be made in the event that a person becomes incapacitated. Without a durable power of attorney for finance in place, the court will decide when and how important bills (such as a child's tuition or mortgage payments) get paid. Arranging in advance to grant someone else the power to pay bills in this nature is thus a way of reducing family stress.
Like other legal documents, the durable power of attorney for finance can be created without the assistance of a lawyer, although this is not always a good idea. It must be notarized and witnessed before it becomes valid. The person creating the document can designate the scope of financial powers to be granted to the designated executor so as to limit that person's ability to mismanage the funds.
- Durable Power of Attorney for Healthcare. The durable power of attorney for healthcare legally grants another person the ability to make healthcare decisions in the event that the person creating the document becomes incapacitated and unable to speak on their own behalf. This is an important method for making sure that personal wishes regarding medical care are honored. It is appropriate for all adults to create such a document.
- Financial Considerations. In addition to legal considerations surrounding the disposition of an elder's assets and estate, there are also day-to-day financial considerations that need to be thought though so as to help insure that elders and family members will continue to be able to live as comfortably as possible.
- Beneficiary Information. In addition to completing a will and applicable durable power of attorney documents, it is important to make sure that beneficiaries are appropriately named and up to date on financial assets, including retirement accounts (pensions, 401k accounts, etc.), life insurance plans and other assets. Such assets are not likely to be covered by a durable power of attorney, and it can be difficult, if not impossible, to change or arrange for disbursement of these assets upon someone’s death if beneficiary information is not up to date.
- Medicare and Social Security. Elders approaching retirement age (generally 65-68 years of age depending on year of birth) should file for Medicare and social security benefits. Generally, it makes sense to apply for such benefits between three and six months prior to retirement age to allow for necessary processing time. Social Security benefits are determined by the amount of social security taxes a person paid over their entire employment history. Medicare comes in two forms – Part A and Part B. Part A pays for eligible inpatient and home health expenses, while part B pays for eligible doctors; outpatient services; and some physical, occupational, and speech therapy services. Supplemental Medicare policies may also be purchased to cover expenses, such as prescription drugs. Ten standard Medicare plans are offered nationwide (titled Medicare A through Medicare J) at present. It is worth researching these benefits.
- Supplemental Insurance. There are problems with both Medicare and Social Security coverages. Medicare does not cover numerous services and expenses, and no body knows if Social Security will remain solvent in the future. For these reasons, it may be wise to explore the purchase of a long term care insurance policy, and/or supplemental medical insurance policy. Long-term care plans and supplemental medical plans may help pay for needed care facilities and treatments that Medicare will not. However, most such policies have a lifetime maximum benefit level and many have daily/monthly maximums as well. There are also usually set criteria that trigger coverage. Not all conditions or situations will result in benefits even though the insurances have been paid for in advance. Because such plans may have up front eligibility requirements, elders who are already have a pre-existing condition may be denied coverage. While the downsides to purchasing supplemental insurances do exist, they can prove to be valuable means of funding care and are thus worth exploring.
- Trusts. A trust is a legal device into which elders' assets can be contributed. Monies contributed into the trust are no longer the property of the elder, but instead now belong to the trust. The trust can be set up in various ways so as to pay out a small income to the elder during his or her lifetime, and then disburse the remainder of the assets to beneficiaries upon the elder's death. The major benefit of setting up a trust is to shield assets that would otherwise need to be sold off to pay for care before government care benefits will kick in. In order for this trick to work, however, the trust must be set up years in advance of the need for care. Trusts are a complex legal device that can only be created and managed by a knowledgeable lawyer. Consult with a lawyer who handles estate planning for further information on trusts.