Category: Elder Law

Best Uses of Life Insurance Benefits

Best Uses of Life Insurance Benefits

The loss of a spouse is an extremely stressful event. It comes with many emotions that can be overwhelming for the bereaved. Hopefully, life insurance is one thing that was put in place to allow those remaining to process their loss without fretting over their finances. But what are the best uses of life insurance benefits, says Kiplinger’s recent article entitled “What Is the Best Way for a Widow to Use Life Insurance Proceeds?”

Life insurance death benefits can be paid within 30 days after you submit a claim. To do this, you need a certified death certificate, which is generally issued in less than a week by the funeral home. You should also order plenty of copies (about 15) for closing accounts.

The best use of the money is different for each widow and her unique situation.

Funeral Costs. Use life insurance money to cover these costs to decrease your financial strain.

Ongoing Expenses. When your spouse dies, living expenses do not stop. Your income is frequently reduced. In fact, after the death of a spouse, household income generally declines by about 40% due to changes in Social Security benefits, spouse’s retirement income and earnings. The death benefit from a life insurance policy can help provide the funds you need to help cover your mortgage, car payment, utilities, food, clothing and health care premiums.

Debts. You are generally not personally responsible for paying off the debts of your husband, provided they are in his name alone. When an estate does not have enough funds to pay all the debts, any gifts that were supposed to be paid out to beneficiaries will most likely be reduced. Note that you may be responsible for certain types of debt, such as debt that is jointly owned or a loan that you have co-signed. Talk to an experienced elder law attorney to understand the laws of your state, so that you know where you stand concerning all debts.

Create an Emergency Fund. Life insurance can help build a liquid emergency fund, which should cover three to six months of expenses.

Supplement Your Retirement. When a woman loses her spouse, she becomes much more vulnerable to poverty. To retire, a person typically needs 80% of their preretirement income to live comfortably.

Education. If you are a young widow, the life insurance proceeds can be used to pay for going back to school to augment your earning abilities. These funds could also cover the cost of college for your children. However, you should only save for college educational costs after your retirement savings is secure.

It is up to beneficiary to decide the best uses of life insurance benefits going forward. It is a good idea to consult an estate planning and probate attorney to make sure you have a full grasp of the benefits provided. If you would like to learn more about life insurance and estate planning, please visit our previous posts. 

Reference: Kiplinger (Dec. 17, 2021) “What Is the Best Way for a Widow to Use Life Insurance Proceeds?”

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Documents you can use to Plan for Incapacity

Documents you can use to Plan for Incapacity

There are a number of factors, such as illness or disability, that can cause someone to become incapacitated. You need to have a plan should the unthinkable happen. There are documents you can use to plan for incapacity. The chief reason for a Power of Attorney (POA) is to appoint an agent who can make decisions about business and financial matters if you become incapacitated, according to an article “Estate planning in case of incapacity” from The Sentinel-Record. For most people, the POA becomes effective at a later date, when the person signs a written authorization to act under the document, or when the person is determined to be incapacitated. This often involves having the person’s treating physician sign a notarized statement declaring the person to be incapacitated. This type of POA is referred to as a “Springing POA,” since it springs from a future event.

The challenge with a springing POA is that it requires reaching a point in the person’s life where it is clinically clear they are incapacitated. If the person has not yet been diagnosed with Alzheimer’s disease or another form of dementia, but it is making poor decisions or not able to care for themselves, it becomes necessary to go through the process of documenting their incapacity and going through the state’s process to activate the POA.

For a more immediate POA, your estate planning attorney may recommend creating and signing a Durable Power of Attorney. This allows you to appoint someone to manage personal and business affairs immediately. For this reason, it is extremely important that the person you name be 100% trustworthy, since they will have instant legal access to all of your property.

A Power of Attorney can be customized to include broad powers or limited to a specific transaction, like selling your home.

This is not the only way to allow another person to take over your affairs in the event of incapacity.  However, it is easier than seeking guardianship or conservatorship. Another method is to place assets in a revocable trust, which allows you to maintain control of the assets while alive and of legal capacity. The trust includes a successor trustee, who takes over in the event you become incapacitated or die.

The successor trustee only has control of the assets owned by the trust, so if the purpose of the trust is planning for incapacity, many, if not all, of your assets will need to be retitled and put into the trust.

A properly created estate plan will often use both the Durable Power of Attorney and a Revocable Living Trust, when preparing for incapacity.

Sadly, many people fail to have these legal tools created. As a result, when they are incapacitated, the family must go to court to have a person appointed to manage their affairs. This is usually referred to as a “legal guardianship.” The proceeding to obtain a guardianship is lengthy and complicated. Once the guardianship is established, the guardian must file annual accountings with the court documenting how all of the funds are used. The guardian must also post a surety bond, designed to protect assets in case of improper use.

Guardianship and its costs and time-consuming tasks can all be avoided with a properly prepared estate plan, including planning for incapacity. Whether it be a POA, guardianship or conservatorship, make sure you plan to have documents prepared to use in case of incapacity. If you would like to learn more about POA and other incapacity documents, please visit our previous posts.

Reference: The Sentinel-Record (March 27, 2022) “Estate planning in case of incapacity”

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What Do You Need to Age in Place?

What Do You Need to Age in Place?

Many Americans prefer the idea of living out their gold years at home and “age in place”, rather than relying on family or assisted living. So what do you need to age in place? Home modification is the official term (from the Americans with Disabilities Act) for renovations and remodels aimed for use by the elderly or the impaired. It means physically changing your home, removing potential hazards and making it more accessible, so you can continue living in it independently.

Bankrate’s recent article entitled “The best home modifications for aging in place” reports that home modifications can be pricey—typically ranging from $3,000 to $15,000, with the average national spend being $9,500. However, it can be a worthwhile investment. You can save money by doing the right home modifications. That is because the longer you can safely live in your home, the less you will need to pay for assisted living care.

The best aging-in-place home modifications align with “universal design,” an architectural term for features that are easy for all to use and adaptable, as needs dictate. This includes additions and changes to the exterior and interior of a home. Some of the simplest home modifications include DIY jobs:

  • Adding easy-grip knobs and pulls, swapping knobs for levers
  • Installing adjustable handheld shower heads
  • Rearranging furniture for better movement
  • Removing trip hazards; and
  • Installing mats and non-slip floor coverings.

Next, are some more complex home modifications. These probably would need a professional contractor, especially if you want them up to code standards:

  • Installing handrails
  • Adding automatic outdoor lighting
  • Installing automatic push-button doors
  • Leveling flooring; and
  • Installing doorway ramps

There are also home modifications that can be done by room:

  • In the bathroom, installing grab bars and railing, a roll- or walk-in shower/tub, or a shower bench
  • In the kitchen: adding higher countertops, lever or touchless faucets and cabinet pull-out shelves
  • For the bedroom, use a less-high bed, non-slip floor, walk-in closets and motion-activated lights
  • Outside, you can add ramps, a porch or stair lifts, and automatic push button doors.

Finally, throughout the house, keep things well-lit and widen hallways and doorways; add a first-level master suite, elevators or chair lifts, “smart” window shades/thermostats/lighting and simpler windows.

Note that some home modifications may qualify as medical expenses. As a result, they are eligible for an itemized deduction on your income tax return. A home modification may be tax-deductible as a medical expense, if it has made to accommodate the disabilities (preferably documented by a physician or other health care provider) of someone who lives in the home, according to the IRS. Home modifications may not be the only thing you need to age in place. Speak with an experienced elder law attorney who will be familiar with many of the types of assistance available to keep you in your home. If you would like to learn more about elder care, please visit our previous posts. 

Reference: Bankrate (March 30, 2022) “The best home modifications for aging in place”

 

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Avoid the Economic Dangers of Caregiving

Avoid the Economic Dangers of Caregiving

AARP’s recent article entitled “5 Steps to Avoid Economic Pitfalls of Caregiving” reports that 20% of family caregivers have to take unpaid time off from work due to their caregiving responsibilities. There are ways to avoid the economic danger of caregiving.

The average lifetime cost to caregivers in lost wages and reduced pension and Social Security benefits is $304,000 — that is $388,000 in today’s dollars. This does not count the more than $7,200 that most caregivers spend out of pocket each year, on average, on housing, health care and other needs for loved ones in their care, according to the AARP report.

Step 1: Calculate the gap. The average cost of a full-time home health aide is nearly $62,000 a year, and a semiprivate room in a nursing home runs about $95,000. Ask your parents about the size of their nest egg, how fast they are spending it, whether they have long-term care insurance and how much equity they have in their home. Compare your parents’ assets against their projected expenses to determine your gap.

Step 2: Fill the gap without going broke. Try to find free resources: Use the National Council on Aging’s Benefits Check Up tool to find federal, state and private benefit programs that apply to your situation. Then create a budget to determine what you can contribute, physically and in dollars, to closing the gap. In addition, ask your siblings if they can pitch in.

Step 3: If a gap remains, consider Medicaid. This program can cover long-term care. However, your parent or parents may need to spend down assets to qualify. Note that if just only one parent is in a nursing home, the other can generally keep half of the assets, up to a total of $137,400 (not including their house). However, the rules differ by state. As a result, this can get complicated. Speak with an elder-law attorney for help.

Step 4: No matter what the gap, try to get paid. If your parents have enough resources, you may discuss having them pay you for caregiving. However, you should speak with an attorney first about drawing up a contract. This should include issues like the number of hours a day you will spend on providing care and whether doing so will require you to quit your job. The caregiving agreement is written carefully, so that it does not violate Medicaid regulations about spending down assets.

Step 5: Protect your own earning ability. If you are mid-career, it is very difficult to leave a job for ​family responsibilities like caregiving and then go back into the workforce at the same salary. The Society for Human Resource Management says that it costs six to nine months’ salary to replace an employee, so many employers now see it is less expensive to make an accommodation.

It can be difficult to avoid the economic dangers of caregiving. Work closely with an elder law attorney to ensure you have everything in order to protect yourself and your loved one. We can help! If you would like to learn more about caregiving, please read our previous posts. 

Reference: AARP (Feb. 24, 2022) “5 Steps to Avoid Economic Pitfalls of Caregiving”

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Advance Care Planning a Benefit to Seniors

Advance Care Planning a Benefit to Seniors

Advance care planning (ACP) is an ongoing discussion that involves shared decision-making to clarify and document an individual’s wishes, preferences and goals regarding their medical care. This is extremely important to making certain that they get the medical care they want, if they become incapacitated and unable to make their own decisions. Advance care planning is a major benefit to seniors. Despite the importance of ACP, most Americans don’t have their medical wishes documented, according to Medical Life Sciences News’ recent article entitled “Comprehensive approach may promote Advance Care Planning for elderly adults.”

In the pandemic, too many families exhausted themselves attempting to address this issue, agonizing over what their loved one might have chosen for their care if they had been given the chance.

Dr. Angelo Volandes, MD, MPH, physician and researcher, Division of General Internal Medicine at Massachusetts General Hospital, and colleagues started the Advance Care Planning: Communicating with Outpatients for Vital Informed Decisions (ACP-COVID) pragmatic trial. This experiment was designed to see if ACP participation during the pandemic would increase following implementation of video decision aids and clinician communication skills training. They also looked at how these interventions would affect ACP documentation among patients from ethnic and racial minority groups, specifically African Americans and Hispanics.

The trial included a large, diverse patient population aged 65+ from 22 outpatient clinics at Northwell Health, the largest healthcare system in New York State. ACP documentation from three six-month time periods was compared:

  1. Pre-COVID-19
  2. The first wave of COVID-19; and
  3. An intervention period.

The findings showed that ACP documentation was significantly greater among all groups during the intervention period, with African American and Hispanic patients showing the most significant increases.

“The stark disparity in COVID-related outcomes for African American and Hispanic patients highlights a reality already known by many: our healthcare system routinely fails to meet the needs of minority patients. No one intervention or initiative is going to correct all those failings though advance care planning, through engaging and empowering patients, is one of the most effective, immediate ways to address disparities in care,” adds Volandes, who is also an Associate Professor of Medicine at Harvard Medical School.

“Fundamentally, advance care planning aims to empower patients. The results of our study demonstrate the importance of meeting patients where they are,” adds Volandes. “Whether that means providing information in their native language or sharing educational material via text rather than a patient portal, if advance care planning is to be about the patient and we need to find ways to ensure that they feel they have the knowledge and ability to make decisions alongside their clinicians when they deem the time is right. COVID-19 has made ACP more important than ever, and especially in communities that have been hardest hit by the pandemic.” The bottom line is that advance care planning can be a huge benefit to seniors and their caregivers. Work closely with an elder law attorney to begin the planning process. If you would like to learn more about long-term care and nursing home planning, please visit our previous posts. 

Reference: Medical Life Sciences News (Feb. 28, 2022) “Comprehensive approach may promote Advance Care Planning for elderly adults”

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Do you need an attorney for probate?

Do You Need an Attorney for Probate?

Do you need an attorney for probate? Having an estate planning attorney manage the probate process can alleviate a great deal of stress for the family, says the recent article “Reasons to hire a lawyer for probate” from The Mercury.

For one thing, the attorney will know what your state requires in the way of executing the will. You may need to pay a state inheritance tax, or you may have to file certain documents specific to your state. Even if the surviving spouse is the only beneficiary and all assets are either jointly titled or are distributed through beneficiary designations, there are other details you may miss.

A surviving spouse will certainly appreciate not having to undertake a mountain of paperwork or electronic forms on their own, especially if there are no adult children living nearby to help. Which beneficiary form needs to be completed, and what will financial institutions need to change accounts to the proper ownership? It can be daunting, especially during mourning.

Depending upon the state, there may be exemptions, discounts and deductions from the estate. A layperson likely does not know if their state deducts the attorney’s fees and/or the executor fees. Even attorneys who do not practice estate law do not always know about these potential benefits.

An estate planning attorney will also know how long the probate process will take. If the surviving spouse is the executor and is unable to attend probate court, some cases accept a remote process. There are also COVID-specific procedures in some states, which a layperson may not know about.

If there are family disputes between beneficiaries regarding distribution, an estate planning attorney could be a very important resource. There may need to be a settlement agreement created that conforms to the state’s law. If it is not handled properly, the agreement could be deemed invalid if challenged in court.

What if the family home is being sold? Sometimes executors working without an attorney do not realize the requirements from title insurance companies regarding the sale of a property where one of the parties has passed. Failing to make sure that these requirements are met, could delay the settlement of the estate and put the property sale in jeopardy.

If there are health or creditor issues, or disputes over property, an estate planning attorney is invaluable in protecting the surviving spouse and/or executor. In many cases, the estate is left with substantial medical bills, Medicaid claims or related costs. Executors may not know their rights, or how to defend the estate. A knowledgeable estate planning attorney will. You need an attorney to ensure that all of your bases are covered for your probate hearing. If you would like to learn more about probate and trust administration, please visit our previous posts. 

Reference: The Mercury (Feb. 8, 2022) “Reasons to hire a lawyer for probate”

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Medicaid annuity might be an option

Medicaid Annuity might be an Option

What happens when one spouse needs nursing home care? Medicare typically does not cover long-term care.  The current median monthly cost of a private room at a nursing home is about $8,000, according to the recent article “A ‘Medicaid annuity’ may be a useful option when your spouse needs nursing home care” from CNBC. For people with limited assets and income, Medicaid will pay. However, what about families who have some assets but are not wealthy enough to be able to pay for their care without leaving the well spouse impoverished? It is a common situation, which requires advance planning. A Medicaid annuity might be an option for your family to consider.

For some families, spending down assets by paying off debt or making purchases to qualify is one way. For others, buying a Medicaid Compliant Immediate Annuity is another. This allows the couple to convert countable assets for Medicaid purposes into an income stream for the well spouse.

Medicaid Compliant Annuities are complex financial instruments and are not for everyone. They are often used in a crisis situation, when there are no other options.

Medicaid has a five-year look-back period in most states. The program reviews all assets and transactions from the prior five years to make sure assets were not transferred out of ownership solely so the person can qualify for Medicaid.

All assets are counted, whether they are owned by the ill spouse or the well spouse. The limits on assets, which include cash, investments and bank accounts, among others, vary slightly by state. However, they can be as low as $2,000. An experienced elder law attorney helps to navigate this process.

For a married couple, in some states, the healthy spouse may have up to $137,400 in total assets. Anything above that is considered available to use for long-term care. Some states have limits on income, while other states do not count the healthy spouse’s income.

If a couple has $100,000 above the state’s asset cap, they can purchase an annuity payable to the well spouse, based on their own life expectancy. For the annuity to be Medicaid compliant, it must meet several requirements. The state has to be named the remainder beneficiary for at least the amount Medicaid paid for the sick spouse’s nursing home care. The annuity must be an immediate annuity, meaning the income stream begins immediately, and it must be irrevocable.

Medicaid programs are run by the state, so each state has its own rules, asset limits, etc. A detailed conversation with a local elder law attorney with experience with Medicaid will be helpful in deciding of a Medicaid annuity might be an option for you. There are some states that do not allow the use of annuities for Medicaid planning. If you would like to learn more about Medicaid planning, please visit our previous posts. 

Reference: CNBC (Jan. 26, 2022) “A ‘Medicaid annuity’ may be a useful option when your spouse needs nursing home care”

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Debt doesn’t disappear when someone dies

Debt doesn’t Disappear when Someone Dies

There are two common myths about what happens when parents die in debt, says a recent article “How your parents’ debt could outlive them” from the Greenfield Reporter. One is the adult child will be liable for the debt. The second is that the adult child won’t. Debt doesn’t disappear when someone dies.

If your parents have significant debts and you are concerned about what the future may bring, talk with an estate planning attorney for guidance. Here’s some of what you need to know.

Creditors file claims against the estate, and in most instances, those debts must be paid before assets are distributed to heirs. Surprisingly to heirs, creditors are allowed to contact relatives about the debts, even if those family members don’t have any legal obligation to pay the debts. Collection agencies in many states are required to affirmatively state that the family members are not obligated to pay the debt, but they may not always comply.

Some family members feel they need to dig into their own pockets and pay the debt. Speak with an estate planning lawyer before taking this action, because the estate may not have any obligation to reimburse you.

For the most part, family members don’t have to use their own money to pay a loved one’s debts, unless they co-signed a loan, are a joint-account holder or agreed to be held responsible for the debt. Other reasons someone may be obligated include living in a state requiring surviving spouses to pay medical bills or other outstanding debts. If you live in a community property state, a spouse may be liable for a spouse’s debts.

Executors are required to distribute money to creditors first. Therefore, if you distributed all the assets and then planned on “getting around” to paying creditors and ran out of funds, you could be sued for the outstanding debts.

More than half of the states still have “filial responsibility” laws to require adult children to pay parents’ bills. These are old laws left over from when America had debtors’ prisons. They are rarely enforced, but there was a case in 2012 when a nursing home used Pennsylvania’s law and successfully sued a son for his mother’s $93,0000 nursing home bill. An estate planning attorney practicing in the state of your parents’ residence is your best source of the state’s law and enforcement.

If a person dies with more debts than assets, their estate is considered insolvent. The state’s law determines the order of bill payment. Legal and estate administration fees are paid first, followed by funeral and burial expenses. If there are dependent children or spouses, there may be a temporary living allowance left for them. Secured debt, like a home mortgage or car loan, must be repaid or refinanced. Otherwise, the lender may reclaim the property. Federal taxes and any federal debts get top priority for repayment, followed by any debts owed to state taxes.

If the person was receiving Medicaid for nursing home care, the state may file a claim against the estate or file a lien against the home. These laws and procedures all vary from state to state, so you’ll need to talk with an elder law attorney.

Many creditors won’t bother filing a claim against an insolvent estate, but they may go after family members. Debt collection agencies are legally permitted to contact a surviving spouse or executor, or to contact relatives to ask how to reach the spouse or executor.

Debt doesn’t disappear when someone dies. Planning in advance is the best route. However, if parents are resistant to talking about money, or incapacitated, speak with an estate planning attorney to learn how to protect your parents and yourself. If you would like to learn more about managing debt and property after a loved one passes, please visit our previous posts. 

Reference: Greenfield Reporter (Feb. 3, 2022) “How your parents’ debt could outlive them”

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Information in our blogs is very general in nature and should not be acted upon without first consulting with an attorney. Please feel free to contact Texas Trust Law to schedule a complimentary consultation.
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