According to various sources, 60% of us will require some form of long term care during our lifetime. Another 50% of us will be involved in providing some form of long term care for a family member during their lifetime.
Do you or your parents have an established long term care plan? Why should you? What is it exactly? How can it be of benefit? Does it matter to your family?
Family means many things to many different people. Essentially, it is who brought us into the world, cared for us during our adolescence, and helped to form our lives.
As we grow older, there is a changing of attitudes and family hierarchy in which parents, many times, become subservient to the decisions of their children, or even grandchildren. Major choices have to be made as long term care becomes imminent. The Long Term Care Plan becomes radically important as age can irrevocably change the formation of the family from positives to negatives. The Long Term Care Plan (LTCP) can force you into the reality of what issues must be dealt with for there to be an easier transition into the elder lifestyle. What you encounter with a loved one who is in their elder years and the issues that are presented, should be a roadmap for you in developing your own LTCP.
Before introducing some professionals in the field of long term care planning and revealing their responses to my questions, let’s review some issues involved in such planning so as to emphasize the importance of a LTCP.
When we think of long term care planning, what are our primary concerns?
1) Finances: What funds will be utilized to pay for our care? Can we afford to underwrite our own care at $7,000 to $8,000 a month in a nursing home? What about home care? Most Americans want to be cared for at home in their familiar surroundings. Do we have the funds to pay for caretakers at $150 to $300 per day?
Sit down and look at your assets. How much of them are readily liquid, so that they could be utilized for long term care. Get a calculator and determine how long you could self-insure given your monthly income and liquid assets.
2) Your Spouse (if any): What kind of financial burden will you place on that wonderful spouse who has cared for you over the years? Might you impoverish her/him if everything is invested in your care financially? What about the emotional aspect if he or she becomes your caretaker? Is this something you would desire or not?
3) Family Caretakers: Who would you want to handle your financial affairs if you lost the ability to pay your bills, go to the bank, arrange your taxes, pay for house maintenance, etc. Do you trust them with your checkbook? Who would you choose to make daily healthcare choices for you, determine if you receive care at home, in an assisted living facility, or eventually in a nursing home?
Do you have children who have the time and availability to care for you on a consistent basis? If so, what effect will that have on their spouses and families?
4) The Home: What happens to the home should you have to leave for long term care needs? What happens to the personal belongings, the furnishings, the family possessions?
Does the home get rented? Do you downsize to a smaller home? What about a reverse mortgage to increase available funds? Can you move in with family members? Do you sell the home or leave it to your children by inheritance?
5) Nursing Facilities: Have you checked out any facilities in the community in which you might feel comfortable?
Some facilities offer an extended home life in which the units feel homey and comfortable. They offer activities which would be impossible in your home. Also, they provide for the ability to be surrounded by other elders who have similar issues in which you can identify.
It is well worth the time to visit a facility personally and experience it firsthand. Also, to determine the costs and fees for residency, so as to determine whether they are affordable.
Once you determine that a facility is for you if required in the future, you should designate such in your LTCP and incorporate this decision in your estate planning documents, such as your Trust and Advance Health Care Directive.
6) Long Term Care Insurance: I understand that this insurance can be expensive and another financial burden on the budget, but it is worth taking a look at. Long term care expenses can be catastrophic and render a family destitute. This type of insurance policy should be scrutinized closely with an understanding of the following and policy provisions:
a. What rating does the insurance company have with A.M. Best? It should be an A, A+, or A++.
b. Does the insurance company sell more than long term care insurance?
c. Is the policy tax qualified?
d. Are there a minimum of 2 ADLs (Activities of Daily Living) required to initiate benefits?
e. Is there a “pool of money” as opposed to a “stated period?”
f. Understand how the “elimination period” is implemented.
g. When is the “waiver of premium” activated?
h. Is home care included and with what restrictions or limitations?
i. What is the policy and/or company’s history for raising premium rates over the past 20 years?
7) Home Care Companies: It is highly advisable that you interview with home health care companies well in advance of need. Most people wish to remain in their home for care and should be comfortable with the company and its services. Once this is accomplished, we include the name of the company in the estate planning documents to be carried out by the Successor Trustee and/or the Agent in the Advance Health Care Directive. This action avoids an incomplete screening of companies for expenses, services, background check policy and testimonials from existing clients during the frustrating and stressful period of planning home care for a loved one post incident for need for care.
Prudent questions should include:
a. Years of presence in the community;
b. Number of employees employed by the company;
c. Extent of background checks on potential employees;
d. Lawsuits filed against the company regarding elder abuse;
e. List of costs and expenses;
f. Specific services provided.
8) Caretaker Contracts with Family: As part of the LTCP, you may wish to enter into a formal care contract with a family member. These contracts are formal agreements which are closely scrutinized by the Department of Health Services when application is made for MediCal benefits. These contracts essentially pay a family member for caretaker services so as to avoid the issue of gifting to a family member which triggers the Transfer Rules for MediCal. If you are considering using a family member as a caretaker for payment, a formal contract is required along with income tax withholding as any other employee unless the family member can qualify for independent contractor status.
9) Estate Planning Documents:
a. Family Trust
b. Will
c. Financial Durable Power of Attorney
d. Advance Health Care Directive
It is important that these documents be updated with new laws, including the Deficit Reduction Act which is the catastrophic health law being implemented in California. This law has significant implications regarding nursing home application and Medi-Cal eligibility and the impact of assets owned or transferred over the past five (5) years. Additionally, it may have drastic ramifications on how the home is titled for ownership.
Finally, the Long Term Care Plan should be made apart of the estate plan so that all documents act in concert without a conflict in long term care objectives. For example, there should be authority in your documents for your healthcare agent to obtain funds from your Trustee or financial agent for home care expenses. This gives your healthcare agent some superiority over your financial agent for this purpose. There also needs to be some provision for your agent in your Financial DPA to work with your Trustee to transfer the home out of the Family Trust to avoid potential Medi-Cal liens and claims. Again, this is another prime example of how your estate planning documents should work together. It is essential that your objectives for your LTCP be included in your estate plan.
All of these issues should be resolved and included in your LTCP. My office will be happy to provide you a format for this information which will be subsequently included into your estate planning documents.