Most people know that they should have some type of an estate plan in place, but they just haven’t gotten around to it yet. Maybe they feel healthy (and lucky!), or maybe they just don’t want to face the decisions that need to be made in consideration of someday reaching the end of their life. But it isn’t just about what happens to your assets after your death. Good estate planning encompasses how decisions will be made if a person becomes incapacitated, and elder law planning takes things a step further to look at how your assets can be protected in the event that you need to move to a long-term care facility.
“It’s not estate improvising; it’s estate planning.”
If you succeed in reaching the ripe old age of 65, the odds are slightly greater than 50% that you’ll spend some time in a long-term care facility. The average length of stay in a long-term care facility is about two and a half years, and the cost of care in our area is about $8,500 per month. That’s a little over $100,000 per year, and over $250,000 if your length of stay there matches the national average. Some people, however, will end up in the nursing home for 5 years, 10 years, or even longer. If you’re telling yourself, “I’ll never go to a nursing home,” your thoughts are similar to about 99% of the population. Nobody wants to end up in a nursing home, but the unfortunate statistics show that many of those people were wrong and they actually do end up spending a portion of their lives in a long-term care facility.
But planning isn’t just to protect against the high cost of long-term care. It also involves the selection of guardians for young children, powers of attorney for others to make your decisions when you’re incapacitated, the avoidance of probate costs, and the establishment of trust rules for the delayed distribution of assets to children or grandchildren. A young man recently told me that he and his wife didn’t need a trust because they didn’t own a home. He said that the only real asset they had for their two young children was $600,000 in life insurance. Without establishing a trust with rules for the distribution of the funds, you have to ask if the children will be responsible enough to properly benefit from each receiving $300,000 at the age of 18. Will they have any of the money left by the time they reach 19? The parents are paying for the life insurance for the benefit of their children, but without proper planning, will the children really get the full benefit that the parents had hoped for?
And how do you handle things for your spouse? If one of you moves to a nursing home, the other is referred to as a “community spouse” because they remain in the community. If you should pass away, your spouse is then referred to as the “surviving spouse.” Whether you’ve been married for 5, 10, or 15 years, or you’re in that lucky group that has been happily married for 40, 50, or even 60 years, you need to plan for how either spouse would continue on if he or she were to become a community spouse or a surviving spouse. Good planning can make a substantial difference in the quality of life of the spouse who remains behind.
A great myth about Medi-Cal is that you can’t qualify unless you have no money at all. That’s often the case if you don’t plan, but proper planning can protect a significant portion of your assets for the benefit of your spouse and your family. Learn what can be done.
If you don’t yet have an estate plan, you should consult a knowledgeable attorney. If you have a plan, but haven’t looked at it for 5, 10, or 20 years, I suggest that you pull it out, take a good look at it, and see whether it still accurately reflects your wishes. If your plan was prepared without looking towards the potential need to have Medi-Cal pay for your long-term care, then your durable power of attorney may actually hamper the Medi-Cal planning efforts that need to be taken to protect your assets. Be proactive. As Gen. George S. Patton said, “A good plan violently executed now is better than a perfect plan executed next week.” Don’t let yourself delay to that point where the lack of a plan hurts you and your family.