Many people, including some estate planners unfortunately, fall into the trap of thinking that estate planning is for after you pass away. The reality is that becoming disabled can be more expensive than all the probate fees and estate taxes combined. Depending on where you go for your statistics, your odds of becoming disabled could be as high as 50%. But whatever number it is, the financial consequences of not being prepared can be catastrophic.
A Big Financial “Ouch”
Modern medicine has made many advances, but combating Alzheimer’s, Parkinson’s, senility, dementia, and even cancers and MS can still leave a person in a twilight period lasting years, possibly a decade or more. If a nursing home becomes necessary the expense can be astronomic. Plus, with some states passing “Familial Obligation Laws” your kids may be liable for your nursing bills. “Of those who enter nursing homes, 44.1% will have a total lifetime use of at least one year, 43.9% will stay between one and five years, and 12% will have a total lifetime use of five years or more, (U.S. DHHS/CDC The National Nursing Home Survey: 2004 Overview). This means that more than half the people who go into a nursing home will spend between $91,250 and $456,250 (in year 2011 dollars) and one person out of every ten will spend even more, perhaps much more, than that.”[California Department of Health Care Services Website]
This Isn’t Your Doctor’s Form – The Advance Health Care Directive Form
Most medical providers will have a HIPAA form available to sign when you visit their offices. The one that we prepare is different in two ways: first, the one we prepare is for estate planning purposes, and second, the one we prepare meets the requirements of California law, which a surprising number do not. Watch out for old forms: people with older estate plans have forms that are no longer current. If your document title is “Living Will” or “Durable Power of Attorney for Health Care” you should have it reviewed. Those documents have since been replaced with the Advance Health Care Directive which includes language to deal with HIPAA and other changes in health care laws.
Financial Decisions Too – The Durable Power of Attorney
With our estate plans, in addition to your trust you receive a Durable Power of Attorney. In order for someone to sign a contract for you when you’re disabled they have to be your agent under a power of attorney. For example, hiring someone to do in-home care for you, or purchasing a wheel-chair or walker. The fill in the blank forms that are common don’t have any estate planning provisions in them. So often, your agent won’t have the ability to get your assets into your trust if that hasn’t been done, or correct the beneficiary designation on your IRAs or your retirement accounts. Perhaps more importantly is the ability to adjust your estate plan and reconfigure your assets if it becomes necessary to qualify for Medicaid or Medi-Cal. What is surprising is that many estate plans actually prevent you from making those adjustments. Being disabled can to be financially devastating, but with the proper planning in place it doesn’t have to be. Image courtesy of olovedog / FreeDigitalPhotos.net