Make It Last – Ep 4 – Planning To Grow Older
There are 10,000 people turning 65 every day from now until the year 2040. In addition, advances in medicine and health treatments means that these individuals will live longer, and may require help along the way in the form of long-term care at home or in an assisted living facility.
Getting older isn’t easy, and with it come incredible risks to your nest egg if you don’t take steps to protect yourself with proactive legal planning.
Today we discuss what kind of care you may need in the future, how to pay for it, and what you can do today to start on the path.
Make It Last with Victor Medina is hosted by Victor J. Medina, an estate planning and elder law attorney, and Certified Financial Planner™. For more information, visit Medina Law Group or Private Client Capital Group.
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Read the transcript from the show below:
Narrator: Welcome to “Make It Last: Helping You Keep Your Legal Ducks in a Row and Your Nest Egg Secure” with your host, Victor Medina, an Estate Planning and Elder Law Attorney, and Certified Financial Planner.
Victor Medina: Welcome back to Make It Last with Victor Medina. I am your host Victor Medina, which makes it very convenient because I know that I’m in the right place. I have a great show for you here today. I’m really excited because one of my favorite topics to talk about is elder law issues and people getting older. We’re going to delve deep into that. We’ve got three segments for you here today.
The first ones going to focus on getting older and the risks that come with that, including the risks to some financial harm that can come to you. The second segment’s going to talk about long‑term care needs, whether not it will happen to you and what you can do to prepare.
Our last segment’s going to talk about some practical tips that you can undertake to help protect your assets and get into the best position going forward.
Before I get started, I do want to take a moment to thank you all for your wonderful response to the show so far. If you are liking the show, the thing that you can do to help me out is recommend it to other people. We’ve got this show that’s airing every Saturday morning, and as soon as when it’s done, you can download it from iTunes and get that available too.
If you are interested in sharing this information with friends, I really appreciate that, and you can send them to iTunes Subscribe and let them know that they can listen to it on every Saturday morning at 7:30 AM. I hope you’ve got your cup of coffee going. It’s clear that I’ve got mine with this kind of energy.
We’re going to get right to it, but if you have any topics that you would like for us to talk about, or if you have any suggestions for how to make the program any better, you can go ahead and email us at feedback, F‑E‑E‑D‑B‑A‑C‑K, firstname.lastname@example.org. That’s our website email address that’s been created for just that purpose just to get your thoughts, and we would love to hear it.
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Apple looks at that and ranks the podcast based on the number of positive reviews that are there, so I would ask you to go ahead and leave a great review. Then people who are looking for a retirement planning podcast will learn about this one, and they can learn a little bit about what we have to talk about here.
Let’s get started with it. Here’s the thing, we are all marching towards old age. By the year 2030, 72 million Americans will be at least the age 65 or older. Now, to give you that in perspective, there’s 200 and something million Americans, so that’s at least maybe a third of those individuals.
If you look at the average lifespan from 65 to the end of life expectancy, that’s the last quarter of our life, so we are really heavily over‑weighted towards people that are getting older. The good news is that longevity is improving, and people are remaining healthy and vibrant at older ages, but the bad news is that the cultural perceptions of old people have not kept pace.
I have in front of me a study from the World Health Organization, and a 2016 analysis found that ageism was abundant and many people were completely unaware of their biases towards older people.
I’ve got another study from “Psychology Today” saying that there’s an especially slippery part about ageism. It’s that we can witness it in action, time and time again throughout society, often without anything triggering our internal antenna that says, “Hey, something is wrong here.”
If it was just about people being perceived as being older, and therefore somehow less contributing to society, that would be one thing, but come with it are risks of elder abuse, and one of the ugly things hiding behind this is financial exploitation. During 2017, the Department of Health and Human Resources reported, and I’m quoting here.
“Each year, an estimated five million older people are abused, neglected, and exploited. In addition, elders throughout the United States lose an estimated” ‑‑ watch this one, folks ‑‑ “2.6 billion or more annually due to elder financial abuse and exploitation, and these are funds that could have been used to pay for basic needs, such as housing, food, and medical care.”
Unfortunately, no one is immune to abuse, neglect, and exploitation. It occurs in every demographic, and can happen to anyone, a family member, a neighbor, even you. Yet, it is estimated that only one out of every five of those crimes are ever discovered.”
We went a little bit deeper in the research, and looked at the United States Department of Justice, and discovered that only two percent of financial exploitation cases are ever reported, which is one of the reasons that elder abuse has been dubbed as a silent epidemic.
There are many reasons why older Americans don’t report abuse. Some might be afraid of retaliation, especially if they’re under the thumb of somebody who is providing their daily household care.
They could be fearing that reporting this misjudgment will cause them to lose independence, if it looks like they can’t handle it on their own, and that’s a very big risk in security to them, risk to their security.
Others might be ashamed that they’ve made a mistake or embarrassed that a family member has betrayed them, because we can see elder abuse and financial exploitation come from a third party, who is soliciting money from an elder and getting them to commit a credit card or a check or just taking that money.
We can also see that risk internally. If somebody’s aware that they’ve been exploited, it can be very hard for them to admit that because it’s embarrassing. It’s embarrassing that somebody with that much experience in life was taken advantage of.
Older people could also think that they won’t be believed, or they have no legal recourse, because we don’t see the common crime of elder abuse being reported, and people who are in a position of trust, end up abusing that, and people don’t know that there might be some recourse.
Whether it’s reported or not, financial crimes and scams can have potentially devastating consequences for the victims. There’s a “US News & World Report” article that cautioned the following, “Elder financial abuse,” and I’m quoting, “such as illegally or improperly taking funds or assets, can shake a victim’s financial footing, and have a profound impact on that person’s well‑being.”
“Financial abuse can lead to significant distress, and research shows that it can increase the risk for depression.” This is a difficult position for them to be in, because as Americans are getting older, many of them will be living alone, and they’re already at risk for significant issues with depression.
If they’ve been taken advantage of, if their financial security has been threatened and put at risk, it means that it could exacerbate some depression‑related conditions, and we really want to help them with that.
In addition to it having consequences for those people, we see that it has consequence for tax payers, as well. One out of every 10 financial abuse victims becomes reliant on Medicaid after their monies have been stolen, because Medicaid is that entitlement program, that safety net, that helps people care for themselves if they’ve run out of money.
There are some things that you can do to help folks that might be in this position. This is from the outside, and we’re going to talk a little bit about what you can do for yourself, but if you’re looking at people from the outside, family members that you have that are older, or if you’re looking at a neighbor down the street that you’re concerned about it, there are some signs that the Department of Justice identified as indicating there’s a potential problem.
The first thing that you can do is you can stay in touch with them, so that you know what’s going on with them.
You have to realize, though…again, because of this level of embarrassment, you might not get a straight answer, but knowing that you’re around or staying present in somebody else’s life, I think would really help them to know that they have a way of reaching out, but it also keeps you in touch with what’s going on, give you a baseline.
In addition, it’s a good idea to watch for sudden changes in bank accounts or banking practices, such as withdrawals or transfers of large sums of money, new names on signature cards for banks, changes to a will or other financial documents.
This is a big one, because when we have somebody come in, and we’re pretty lucky at the Medina Law Group, where you tend to see intact families that care about one another, but I have had interviews with other people, where it became clear that they were trying to take advantage, and clearly we didn’t work with them.
We didn’t give them the power to do that, and we alerted the Office of Protective Services on it. However, it’s important to know that people are making changes to their wills if they’re naming new family members that have been absent in the past, this is the potential start of some financial exploitation.
The other thing you can do is, as I was saying, if there’s somebody who is a previously uninvolved family member all of a sudden surfacing to the top, and presenting themselves as somebody who’s taking care of the senior, that could be a sign that there’s something coming along the way.
To help you help yourself, there are some additional steps that we recommend. The first thing that you might want to do is, take inventory and get organized.
When we do an estate plan for somebody, they get a binder, and in that binder, there’s a tab called Trust Assets ‑‑ we do a lot of trusts. The Trust Assets is just a way for us to encourage the clients to go ahead and list out their trust assets on a spreadsheet, so that people know where everything is.
Just as important as it is to give an overview and a roadmap for where your assets are, it’s to give that to a trusted family member, or at least let them know where that is. You can look, everything that I have is well‑organized, it’s over in this binder, and it’s with my attorney, or it’s in my safety deposit box, so that somebody has a way of cross‑referencing what exists and how to get access to it.
The other thing that you can do that we’d recommend is, go ahead and give a list of emergency contacts to your most trusted advisors.
One of the tremendous advantages for people who have us both as their lawyer and their financial advisor, is that we know where everything is. When it comes to being able to communicate with emergency contacts, we know not only where the legal plan is, but we know where the financial assets are.
That’s important, because if you have two separate people doing that, one hand might not know what the other hand is doing. They might not talk to each other. If we’re involved in all of that, and both sides of it, we’re able to get our hands around, knowing what exists, if there’s something going on that might be a risk to it, and then helping to protect it going forward.
The last one would be to create a really strong financial power of attorney. Powers of attorney are not a one‑size‑fit‑all documents, so download something off the Internet, isn’t going to be sufficient. We’re going to do a whole program coming up just on powers of attorney. It sounds like enthralling.
It’s going to be really good, but people are under the misperception that a power of attorney is just a document that once it’s signed is effective. We want to make sure that it is broad, it has been field tested, you want to know that it will work when you need it.
That really requires the help of a competent elder law attorney because there are things that go beyond the state planning as you get older being able to qualify for government benefits and apply for those and making sure that you have a good power of attorney when you need it, I think, is one of the essential parts to making sure that you’ve got a good, effective plan when the time comes.
Victor: We’ve gone a little long in this segment. We’re going to take a quick break. When we come back, I’m going to share with you the three kinds of long‑term care that could be in your future and how to make sure that you don’t lose your life savings trying to pay for loss.
Stay tuned. We’re going to be back with Make it Last with Victor Medina.
Victor: Welcome back. We’re going to talk a little bit in this segment about the risks of needing long‑term care and the different care options that you have.
Here are the statistics for people who’re going to need care. In the most recent version of what I’ve looked at, it’s one out of every four men, or 25 percent of them will need long‑term care sometime in their life, and one out of every two women will need long‑term care, 50 percent of women.
The statistics suggest that women will need it with the higher percentage than men. Before you start to celebrate, here’s the reason why. First of all, she’s taking care of you, and she’s outlived you. The reason why you need it least often is because you’re dead. Don’t celebrate too much.
When we look at the need for long‑term care, one of the things that is important to illustrate is what long‑term care really means. It’s not going to the hospital. It’s not needing hip surgery, something like that, those are all things that are acute care.
They come under Medicare and some of the other rules, but when we look at long‑term care, it’s really the need for consistent and persistent help with your activities of daily living.
Activities of daily living has some quotes around it because it’s an official term that’s used to determine a level of need, but it’s also a good benchmark for you to understand. It’s dealing with feeding, and bathing, and using the facilities, and getting around in the department, ambulating, remember to take medication.
If you’re in a point in time where you need help with that, because you can’t do it in your own, you would qualify under the umbrella of needing long‑term care. Under that umbrella, there are three different levels.
This might be a good time to start take some notes, if you want to refer back to this a little bit later. Under the long‑term care, there are their different levels. The first level deals with home healthcare. Needing help in your home, in the form of an aide.
If somebody needs to come in and help you deal with the laundry, prep food, and help administer a bath. Those will be in the form of a home healthcare aide and you’d be able to stay home, outside of that.
That’s our first level. That’s the lowest level. When we get to the next level, we start thinking about assisted living. Assisted living isn’t 55 and older living, because that’s independent. You’re on your own, you’re on one level to make it easier for yourself.
Assisted living is when you move into a facility where they’re going to prepare your food, they’re going to monitor you.
The way that I let people know that they’re in an assisted living facility is that there is a string on the wall. That string is there to alert somebody that you need help. That access to medical care is where we get to assisted living, and that tears up in the amount of care that they provide.
You could start very low level where it’s just room and board, like you’re back at college, and there’s activities to do, and new friends to make, but it can also scale up in which they’re doing medication administration, and they’re doing other things to help you.
At the very highest level is skilled nursing care. If you’ve been around long enough, we used to call it to [inaudible 15:15] . That’s the nursing home level of care, but that is also the highest level of care, where essentially what you have is access to 24‑hour‑day, seven‑day a week, nursing level care. Those are skilled nursing facilities.
Skilled nursing facilities also look like rehab facilities. If you’ve ever had a knee surgery where you went to a facility to rehab, and you were living there, as opposed to doing an outpatient, that looked very much like a skilled nursing facility because the level of care that they were giving.
Each one of this options cost to different things. If you’re at a home healthcare level, you’re looking to pay somewhere between $21 to $23 per hour with a minimum of a three‑hour stay.
There are home healthcare agencies that will provide an aid usually in a three‑hour increments and usually about $21 to $23 per hour. They will also negotiate a full day rate. That is somewhere between $200 and $220 for an eight‑hour stay or full day stay if they’re providing somebody for the entire day.
The home healthcare industry is largely unregulated. If you pick up a copy of a franchise magazine. One of the things you’ll see there is that the top franchise, top 10, three of them are going to be home healthcare agencies.
These names that are common place out there, are ones that are licensed to individuals that are developing businesses in the world of home healthcare. Does that mean that they’re necessarily bad? No, it doesn’t. They could be fantastic. The fact that they are unregulated just means that there are qualifications to entering the marketplace.
You do want to make sure that you have some referrals and cross references before you select one. One of the biggest services that we provide for elders is somebody who needs home healthcare is putting them in touch with a great home healthcare agency as part of the eldercare plan, because we’ve seen all of them work and that which ones will work better for somebody.
The home healthcare agency, as I said, is the lowest level and you could see anywhere between $75 a day to $220 a day times the month, and you know that you’re somewhere between…doing a quick math, three to six thousand dollars per month. That’s for home healthcare on a regular basis.
When you move up to assisted living, those start at about $5,500 per month. For about $5,500 per month, that’s your room and board level. That is not a very high level of care. That’s not somebody who needs memory care or dementia‑related care.
This is just the room and board level because as you start to increase on that, you’re going to see your costs go up to about $7,500 or $8,500 per month, maybe a little bit more. Those are average ranges for assisted living.
At the very highest level, are skilled nursing facilities. Those can range anywhere between 10 and 14 thousand dollars per month. Those are the big ones. Those are the ones that are going to deplete your assets the fastest when you need it.
I suppose the good news is that people have the shortest amount of stay in the skilled nursing facility because they are the sickest at that point in time. But I’ve had a lots of clients that have been in assisted living facilities for five, six years. If they’re paying…I’ll just use round number to make it easy. Call it $6,000 a month. That’s $72,000 for the year. Times five years, that just about $360,000 or so.
When you look at the cost of long‑term care, it is significant. We’re going to come back in the next segment and talk about who pays for it and some practical steps that you can take in order to make sure that you don’t lose your entire estate paying for long‑term care.
You have to plan for this because you don’t get to choose whether or not you’re going to need care in the future. You don’t have an order button that says, “Well, I’m never going to go into an assisted living facility,” or “I’m never going to need home healthcare.” You can’t predict it.
Victor: It’s extremely important to make sure that you consider long‑term care and how you’re going to pay for is as part of your overall retirement plan because the options that you have when you are younger are less expensive with more flexibility than if you wait too late for it.
When we come back, I’m going to share with you my number one tip for making sure that you have options as you get older and that you don’t risk your nest egg if you need care along the way.
Stay tuned with Make It Last with Victor Medina.
Victor: Welcome back. We’re going to talk today, in our last segment, about how to make sure that you don’t lose your nest egg along the way.
The biggest amount of work that we do, that largest amount of work that we do on our eldercare side is with people who are already in crisis.
I am sharing this information in a desperate plea to get people to take action ahead of the need because when you get to already needing a care plan in crisis the options are very expensive for the legal planning. They are not as flexible and they don’t reward you as much.
We’re able to save maybe 50 percent of what’s left, but it’s a far cry from what we’re able to save if you started sooner.
As a reminder, we talked about the different levels of long‑term care. We said there was home healthcare, there was assisted living, and there was skilled nursing care.
When you’re in one of those situations there’s only really four ways to pay for that. You can use your own money, you can use a long‑term care insurance policy, Medicaid, or the VA. Those are the only four ways to pay for care.
You’ll notice that I did not include things like Medicare or supplemental health insurance. Those insurance policies are just about acute care. Going to the doctor or going to the hospital, but they will not cover a long‑term care need like requiring aid on a regular basis.
When we think about long‑term care insurance, long‑term care insurance is one of those things that it’s best to have when you’re younger because it’s cheaper, but long‑term care insurance does not typically cover all of the costs of care. When you have a long‑term care insurance policy, there are four numbers that you have to pay attention so back with the pen and paper folks.
You have the amount that comes in as your elimination period. Now that elimination period is another word for an insurance company deductible. You can look at that somewhere between 90 days to 100 days. That’s the period of time in which you have to pay for yourself at a private pay rate before the long‑term care insurance picks up the bill.
When we think about the long‑term care insurance, realize that there’s going to be about three months in most cases where you have to pay for yourself.
The second amount that you’re going to look at is the daily reimbursement rate. Some of you took out a number way back when that had some inflation adjustment, but it’s important to realize that the cost of long‑term care has not kept pace with where inflation has been.
What is happening is that people are looking at a long‑term care benefit that might be $200, $220 a day with the inflation changes, but the cost of long‑term care is closer to $300 a day at a skilled nursing facility. When you think about that, you realize that the long‑term care insurance doesn’t cover all of the bill.
Some people have a bank of dollars, which is the total benefit. That might be expressed as a number, a few hundred thousand dollars or so of benefit. It might be expressed as a number of years. Regardless of the way that it’s expressed, what that value is, you can’t ask for that money faster. I hope that makes sense.
Even though you have, maybe, $400,000 available, the insurance companies only going to give it to you at $200 a day at a time, assuming that you have that need. It will be up to you to fund the difference.
If you don’t have one of those policies in place, I mentioned that Medicaid and VA can help pay for care, but those programs are essentially programs that come in when you’ve run out of money. You have to be down to very low amounts, in some cases only $2,000 if you’re a single individual, which means that you’ve spent everything else.
That’s a pretty hard place to be because you’re out of money and essentially out of options. There’s another rule that comes into place that effects how much a spouse can own, too, before either the VA or Medicaid will help with care.
We call that a spousal impoverishment risk. The spousal impoverishment risk is basically the risk that one spouse’s long‑term care needs are going to affect the healthy spouse’s ability to maintain their quality of life.
In New Jersey, a healthy spouse is not allowed to own more than $119,000 no matter how much they start with when they have this care need. If you start with $700,000 in a savings account, you essentially have to spend everything above $119,000.
Which means that, that healthy spouse is stuck living on essentially one salary, because your salary goes to the long‑term care once you’re on Medicaid, but one pension, one social security, and the total amount of $119,000 for the rest of their lives.
That risk is significant. It is incredibly devastating once you’re already in the need of long‑term care so it’s important to do planning ahead of time.
I said that I was going to share with you my number one tip. My number one tip is to get in front of a dedicated eldercare attorney as soon as possible. The moment that you hit 65, it’s important for you to start thinking about long‑term care planning, eldercare planning.
Just as important as addressing it, is addressing it with a competent professional because it doesn’t take much for somebody to change their website and say that they do elder law. You go and look at it. You say, “OK, I guess they’re competent in that area,” but they’re only doing a few plans a month.
Our firm, which focuses on elder law, does somewhere around 150 to 200 plans a year in a given year. That is a healthy amount for us to see all kinds of circumstances to make sure that we are navigating that family to the best possible result.
Because the risk of not getting a great plan would mean devastation to your nest egg is so high, this is not something where you can dabble. It’s not something where you can go to somebody that’s down the street that did your home closing or might have done a will for you in the past and say I need an eldercare plan because this isn’t like a haircut where it’s going to grow back.
If you have an oops moment with this and you don’t have the right plan in place, it’s very, very difficult to come back from that.
The Medicaid rules look at all your transactions for the last five years. That’s a pretty long time. It means that the sooner you get started the better, but it also means that if you are in a situation where you didn’t do the best planning with the best planner, well it could really upset everything and risk your home. It could risk your assets. It could risk a lot.
You want to make sure that the eldercare attorney that you’re working with, that this is their focus, that this is all that they do.
Even if you’re not in our backyard and want to work with us. If you give us a call at 609‑818‑0068, we will put you in touch with somebody in your neighborhood if you don’t want to work with us or you can’t work with us because you’re not close by. I’m that committed to making sure that you’re in front of a great eldercare attorney.
That is my number one tip. Once you turn 65, seek out an eldercare attorney because you might not think of yourself as old. You may not think of yourself as needing long‑term care yet. But it is important that you’re in front of somebody that looks at that, has an idea of what that whole journey looks like, and can help you plot a line where you don’t step on any landmines between here and there.
That’s our show for today. I hope that you liked it. If you have some ideas on how to make the show better, again, please email us at email@example.com and leave a review on iTunes. Apple, as I said, ranks these things based on the quality of the review so please leave a positive review.
Coming up in future episodes we’re going to discuss annuities, the good, bad, and the ugly. We’re going to talk about how to plan to have income in retirement and protect your principal. We’re even going to have a special guest on talking about dementia and assisted living and a whole host of great topics.
Mark your calendar for Saturday mornings at 7:30. Join us again next week or you can join us on iTunes, download the show, and have it delivered to your iPhone. But most importantly, as I said, share this with a friend in need. Let them know about the great information that we’re talking about here and encourage them to join us, as well.
Until then, this is Victor Medina with Make It Last helping you keep your legal ducks in a row and your financial nest egg secure.
Narrator: The forgoing content reflects the opinions of Medina Law Group LLC and Private Client Capital Group LLC and is subject to change at any time without notice.
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