Protecting the Future For Seniors

senior legal planning

Through Legal Planning

Seniors need to take steps to protect their wishes concerning their assets, quality of life, and healthcare decisions.  Legal planning can help ensure that appropriate care and funding are available and also protect assets for beneficiaries.

It is essential that everyone have a Last Will and Testament, a Power of Attorney, and a Living Will or Healthcare Power of Attorney.  It is important to seek the services of an attorney who specializes in elder law and estate planning.  These attorneys have extensive experience in this area of the law and will consider potential consequences in order to avoid problems in the future.

A Last Will and Testament allows a testator to specify how his estate will be distributed after he passes away and also appoints an Executor to manage the estate.  An Executor is responsible for creating an inventory of all the assets of the estate, pay any taxes due, pay or oppose creditors, and eventually make appropriate distributions to the beneficiaries.

There are some important things to consider when signing a Will, such as contingent beneficiaries, successor executors, beneficiary designations on accounts, and whether there is a need for a trust.  An estate plan should be revisited from time to time so that revisions can be made if there are any changes in circumstances, such as births, deaths, marriages, or divorces.

In addition, a qualified estate planning attorney may be able to help an individual or couple plan ahead to minimize estate taxes that would be imposed upon their passing.  For example, New Jersey imposes an estate tax on estates that exceed $675,000.  This tax applies to everyone except spouses.  Contrary to popular belief, even children are subject to the New Jersey estate Tax.  When one spouse passes away, there is generally no tax so long as the entire estate passes to the surviving spouse.  However, when the surviving spouse passes away, the estate will be subject to the tax and can substantially decrease the inheritance that children receive.  It is possible to utilize tax saving strategies to avoid this tax with the right attorney drafting the Last Will and Testament.

A Power of Attorney appoints an Agent (or Attorney-in-Fact) to handle finances for an individual while he is still alive.  The Agent can do a variety of things including pay bills, sell property, and access bank records.  A Power of Attorney can be drafted so that it becomes effective immediately upon signing or it can be drafted so that is only becomes effective when the principal can no longer handle his affairs due to a disability.

If someone does not have a Power of Attorney in place and becomes disabled, a Guardianship proceeding will be required.  A Guardianship, sometimes known as a conservatorship in certain states, is similar to a Power of Attorney, but involves an application to a court.  The required legal paperwork includes doctor certifications stating that the individual is incapacitated and requires a guardian.  The court will also appoint another attorney to represent the individual.  This can be a time consuming and expensive process, but it can be avoided with a proper Power of Attorney in place prior to a disability.

A living will or Healthcare Power of Attorney allows an Agent to make medical decisions for someone if he is unable to do so himself.  If an individual becomes disabled, someone needs to have the authority to make informed healthcare decisions on his behalf.  The principal can appoint someone they trust to make those decisions.

Most seniors are not prepared to pay for the costs of long term care, and an attorney who is familiar with Medicaid planning can help clients preserve their assets. Eventually a nursing home or assisted living facility can become necessary.  Nursing homes can cost as much as $10,000 per month.  Over half of all nursing home residents are on Medicaid.  In light of the current trends towards strict requirements to qualify for benefits, seniors and their families need to become educated about the process as early as possible and have a plan in place.

Medicaid has strict asset and income limits. The applicant needs to spend almost all of his assets before Medicaid will begin to cover expenses.   Medicaid will look at everything an applicant owns including cash, life insurance, annuities, investments, real estate, and retirement accounts.    Medicaid will also look at financial records for a period of five years prior to the application date to make sure that the applicant did not make substantial gifts.  Medicaid wants to avoid the situation where an applicant gives away his property in order to become eligible for benefits.  Gifts that were made within five years from the time a Medicaid application is filed can present a serious problem for a nursing home resident and his family if they do not have enough money to cover the costs during the penalty period.

Married spouses should also take steps to ensure that if one spouse requires nursing home care, the other will have adequate finances to maintain her standard of living.  Medicaid will look at the assets and income of both spouses even if only one needs care. A healthy spouse is permitted to keep the marital residence, one car, and the “Community Spouse Resource Allowance” (CSRA).  The amount the spouse is permitted to keep is generally half of the couple’s combined total countable resources, with a minimum and maximum amount permitted.  A resource assessment will be undertaken when a Medicaid application is filed.

The system of limiting the assets that the healthy, or “community” spouse can keep can cause financial hardship if the healthy spouse needs care in the future.  There are several options to preserve assets that may be applicable to individual circumstances.  It is important to consult with a qualified elder law attorney to consider these options as soon as possible.

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About Dana Bookbinder

DANA E. BOOKBINDER, ESQ. is the Founder of Bookbinder Law, LLC and has been advising families throughout South Jersey for nearly two decades on legal issues concerning asset protection for long term care expenses, public benefits eligibility rules, disability planning, and estate planning. Ms. Bookbinder has been certified as an Elder Law Attorney by the ABA accredited National Elder Law Foundation.

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