Special tips for seniors to
weather tough financial times
December 17, 2008
According to AARP's "Bulletin Today," (Nov. 1, 2008), retirement savings have now dropped as much as 40 percent. In addition, there are daily reports of massive layoffs, numerous foreclosures, inability to get credit and a myriad other economic woes. The experts are predicting it will get worse before it will get better. The current economic crisis has been called "the worst since the Great Depression."
While the economy will be tough for seniors trying to live on fixed incomes and preserve their nest eggs, the children of senior citizens will be hit even harder. They are raising families, paying for college, trying to manage expenses and usually have both spouses working. Now in a shrinking job market and tough economic times, these families will struggle even more to pay the bills and survive.
An unintended result is that the caregiver support that elderly Americans could rely upon to some extent in the past will be more difficult to provide in a bad economy. Resources that were once available to help as Mom and Dad age may now have to be diverted elsewhere. Time that the children had to spend caring for their parents will not be as prevalent as these families turn to projects that can help provide extra income for their families.
The financial squeeze presents a dilemma: 1) family caregiver support is not as available, however; 2) finances to pay for other support is not as available either; 3) inheritances are needed more than ever by the children and grandchildren but there is less likelihood of anything being left. Hence, it is even more important for senior citizens to take advantage of all their rights under the law for government programs, financial assistance, exemptions for preservation of assets, legal strategies for preservation of their homes and whatever else can conserve and extend resources, provide needed care without being a burden to children and help to pass on an inheritance.
Some helpful legal issues to consider are:
•Powers of Attorney—Make sure to have a good power of attorney, and not just any power of attorney. It should be "durable" (survive incompetency) to help avoid expensive court proceedings for guardianships or conservatorships. It should also have paragraphs tailored to the law to allow for the preservation of assets in the event of a long term health care crisis;
•Probate Avoidance—There are numerous strategies to avoid probate, including but not limited to a living trust. AARP estimates that probate expenses can be 4% or more of an estate. The options to avoid probate are usually much cheaper than that.
•Caregiver Contracts— Michigan now allows family members to be paid for caring for a loved one if the care will keep the person out of the nursing home. The caregiving contract has to be legally structured according to particular law; however, this can be a good option for the family in that the caregiver children can afford to take time off work to care for parents while the parents can stay in their own home while diverting financial resources to children rather than a nursing home.
If total coverage through long term care insurance is not possible, consider planning to take advantage of the numerous asset exemptions while receiving assistance through Medicaid. Nursing home costs are now an average of $200 per day, or over $6000 per month. Most estates will be depleted in a short period of time if proper estate planning is not used. With the proper planning the estate and inheritances can be preserved.
•Nursing Home Planning— If you have a loved one in a nursing home now, consider the legal options available to preserve their assets. For example, spouses are generally able to keep 100 % under current law and exemptions found in 42 U.S.C. Section 1396 and the Michigan Program Eligibility Manual, yet many spouses unnecessarily spend down at least half or more of their assets if the other spouse is in a nursing home. This leaves less for the at-home spouse to live on and less to pass on to children. How many would pay more income tax than necessary, yet how often do seniors pay more for nursing homes than they need to?
•Home Protection — Michigan now has an "estate recovery" program that the federal government is requiring. This law says that the state can recover its Medicaid payments out of the estate of the recipient, which generally means from the value of the home since that is the only thing left when Medicaid is received. Just recently the federal government rejected Michigan's version of the law that had numerous exceptions and it will probably require more aggressive recovery efforts in the future. However, reasonable options to protect the home are still possible.
•Home Care & Assisted Living Planning— Veteran's benefits are available to help pay for home care and assisted living. These benefits can pay up to $1,800 monthly and be an invaluable source of support for care for the veteran or a surviving spouse. The proper estate plan can help with qualification regardless of asset limits.
The above options are some of the legal ways that seniors and their families can help to provide caregiving and financial support while conserving and extending resources and even passing on an inheritance. What is at risk is the loss of most or all of a person's estate—usually totaling tens or even hundreds of thousands of dollars, while the fees for such legal services are just a small fraction of that amount. In a tough economy it is even more important for senior citizens and their families to be informed of their options so they can mitigate difficulties for themselves and their families.
Editor's note: An attorney and successful business owner, Gerard J. Garno owns and operates the law firm of Heritage Elder Law & Planning and is a partner in the law firm of Rickard, Denney, Garno & Associates, with affiliated offices in Washington, Imlay City, Lapeer, and St. Clair Shores. For many years Gerard has worked as an attorney in the areas of elder law, estate planning and Medicaid planning. Mr. Garno can be reached at 1-877-731-4357, or visit his website at www.planwithheritage.com.