Managing Your Money : RETIREMENT : Shielding Assets of the Elderly Takes Frankness, Foresight : The crucial message: Be prepared
If you have elderly parents, or if you’re pretty old yourself, the unthinkable should not be the unbroachable.
Unpleasant as it may seem, families should discuss how to organize their affairs in the event of someone’s long-term illness or death. You can save a lot of confusion, pain and loss with a little planning, including arrangements that will protect a parent’s financial independence even during a prolonged nursing home stay.
Planning is especially important now because, as a nation, America is getting older, and older Americans have more assets. It will take frankness and foresight to protect this accumulated wealth from taxes, medical meltdown and nursing home expenses.
Attorneys and others who specialize in legal and financial questions affecting the elderly say prudent older people must act in three broad areas in order to prepare.
* Create mechanisms directing how your money--and health concerns--should be managed if you can’t handle them yourself.
This involves advance directives such as durable powers of attorney or a living will, documents that put someone else in charge if an older person is incapacitated. Beware: These papers bestow broad powers and should be given only to your most trusted family member, friend or adviser.
A durable power of attorney for financial management lets a designee handle your routine financial affairs, such as paying bills, and can also cover investments. Financial institutions may balk at accepting the document if it is more than 30 days old, but language that holds the institution harmless in the event of a lawsuit can smooth the way, says Vincent J. Russo, president of the National Academy of Elder Law Attorneys.
(A similar durable power of attorney, for health care, can prevent conflicts between medical personnel and family members over treatment.)
A letter of instruction can also help. It should include any information that might help someone else carry on if you become seriously ill or die. It might tell where to find the safe deposit box, the second set of keys to the car, insurance policies and so forth. Many stationery stores sell forms for this.
* Set up your finances to cope with the possibility of a long-term stay in a nursing home. Most Americans don’t pass through a nursing home before they die. But if they do, Medicare doesn’t cover the cost--$25,000 to $50,000 annually.
Nursing home insurance is designed to pay for long-term care, but it’s no panacea. Premiums are high (up to $600 a month), and people tend to drop them after four or five years before receiving any benefits, according to Harriet Prensky, an elder-law attorney in Mill Valley, Calif. She adds that people who need this insurance most--those over 75, or those with Alzheimer’s or Parkinson’s disease--are ineligible.
Zoran Basich, a Glendale attorney specializing in elder law, says that when the crunch comes, many policies don’t even cover what’s needed.
Instead of writing checks for dubious insurance, financial planner Mary Malgoire of Bethesda, Md., recommends that people age 60 or less self-insure by setting aside $3,000 a year in a growth-oriented investment fund.
Medi-Cal (Medicaid elsewhere) will pay for long-term nursing home care, but tight restrictions on income exclude the middle-class elderly, so old people must spend down their assets to qualify.
In California, a single or widowed person who needs nursing home care can’t have more than $2,000 in the bank or $35 a month in income, though your home is exempt. This doesn’t provide much financial support if the older person returns home. Nor does it leave much of an inheritance.
(A California nursing home stay by one spouse used to impoverish the healthy partner at home, but Medi-Cal now permits the healthy spouse to keep $68,700 in cash, $1,700 a month in income and the couple’s home, Basich says.)
You can become eligible for Medicaid without losing your assets if you transfer savings, securities and life insurance to others at least 30 months before you enter a nursing home. Basich says you can put cash into your house, or into a trust that lets you relinquish control and still get income. Even lacking 30 months, there may be time to arrange things.
The problem for many people here is not legal, but ethical. A wealthy--or even middle-class--retiree who shunts assets into a home or “gives” them to his children in order to seem poor enough for Medi-Cal is taking advantage of a program intended for the poor.
By 1994, California and several other states hope to launch a partnership program in which you can buy nursing home insurance tied to the Medi-Cal system. Under the plan, an insured person could retain assets equal to the face amount of the policy, and then receive Medi-Cal coverage.
* Figure out if you need a will, living trust or other legal instrument to safely pass property on to your heirs while minimizing the tax bite.
One simple step for a married couple is to hold important assets in joint-tenancy.
Where to Get Help
The American Assn. of Retired Persons offers these free booklets:
* A Matter of Choice: Planning Ahead for Health Care Decisions (D12776)
* Tomorrow’s Choices: Preparing Now for Future Legal, Financial and Health Care Decisions (D13479)
* Health Care Powers of Attorney (D13895)
* Living Trusts and Wills (D14535)
* AARP’s publication directory (C48)
Send a postcard with the names and stock numbers to:
AARP Fulfillment (EE0393)
P.O. Box 22796
Long Beach, Calif. 90801-5796
AARP offers many free publications. Send a postcard for catalogue. Allow four to six weeks for delivery.
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For a free brochure on how to find an elder-law attorney, send a stamped, self-addressed, legal-size envelope to:
National Academy of Elder Law Attorneys
655 North Alvernon Way, Suite 108
Tucson, Ariz. 85711
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Your library or bookstore may have books on planning for the elderly. A couple are:
* “How to Protect Your Life Savings From Catastrophic Illness and Nursing Homes” by Harley Gordon, Financial Planning Institute Inc.
* “Final Choices: Making End-of-Life Decisions” by Lee Norrgard and Jo De Mars, ABC-CLIO Press
