Once again the holiday season is upon us, a time of joy but also stress.  We often visit family members we haven’t seen in some time and that’s when changes in older loved ones become more noticeable.  Some of the changes that may indicate your loved one needs some extra help:

1. Weight loss
2. Deterioration in personal hygiene
3. Unusually dirty or messy home
4. Unusually loud or quiet, paranoid or agitated behavior
5. Local friends and relatives noticing changes in behavior
6. Self-imposed isolation, stops attending activities
7. Signs of forgetfulness such as unopened mail, piling newspapers, missed appointments, unfilled prescriptions
8. Signs of poorly managed finances, such as not paying bills, losing money, paying bills twice
9. Unusual purchases

So what should you be doing if you see any of the above? A physical and neurological exam should identify any medical issues.  A Geriatric Care Manager (GCM) can help assess the options available that will allow your loved one to continue to live a full, fruitful and safe life.  Suggestions may include a home health aide, adult day care, and personal organizer to help with money management.

If your loved one can no longer live alone, possible alternative living arrangements include another family member’s home, assisted living, senior housing or nursing home.  Each choice has pros and cons and expense is often an issue.  Planning should be done as early as possible to determine what government benefits can be tapped to help pay the cost, such as Medicare, Medicaid and Veteran’s benefits. 

 Because the family is together once again, the holidays  are a good time to begin discussing these difficult decisions.  For example, if one child lives nearby an aging parent and sees the decline on a daily or weekly basis, and the other child does not, there is often a tendency for that second child to downplay or minimize the decline, often basing his/her opinion on phone calls with the parent.  But seeing the parent and visiting their home can alter that perception. 

Remember, there are resources available to you.  All you need to do is find them or consult with someone knowledgeable, such as an elder care attorney, who can help point you in the right direction.  But, don’t put it off till next year.  By that time you may be dealing with a full blown crisis.

Much has been written in recent years about the health of Social Security.   As the population ages two things are happening.  Fewer people are paying into the system, while at the same time more people are receiving benefits, raising concern that the program will run out of money.   But there is another, perhaps, more serious crisis developing within state employee pension programs that hasn’t, until now, received as much attention.  We are seeing it here in New Jersey, as are other states across the country.  And it may hit some folks harder than the Social Security problem because so much more of their retirement income may be derived from a state pension than from Social Security.

As the economy remains in a funk and financial markets still struggle to recover from huge losses over the past couple of years, many pension systems have seen their investments take a big hit.  Since the beginning of 2009, for example, New Jersey ‘s pension fund has lost almost 13% in value,  $10 billion to be exact.  It hasn’t helped that the government has taken money from the pension system to plug budget gaps in other areas in past years.

Now, our new governor, Chris Christie, is assessing the situation.  Will he be the one to make some hard decisions?  Our outgoing governor already has signed legislation raising the retirement age and barring retirement payouts for part time employees paid less than $7500 per year.  You can be sure other changes are coming from the new governor.  There have to be.  There isn’t enough money to pay everyone who will be entering the pension system in the next 30 years.  The state has to close the gap somehow.

Now, ask yourself what you would do if the State cut your pension by 10%, 20% or more.  What would you do to replace that income?  And what would you do if you were then faced with rising long term care costs?  The government is dealing with a fiscal crisis.  It is doing the same things we all do when we are faced with a financial crisis – tighten our belts and cut costs.

The signs are there.  You just have to pay attention – and take the opportunity to protect yourself and our families.  Don’t assume the government will be there to protect you.  It’s busy trying to fix it’s own problems.  You’ve got to take care of your own.  And the time to do it is now.

For many families, keeping their elderly loved one at home will require in home assistance.  There are many quality home health care companies in the area so finding one isn’t a problem.  But I find so often that clients don’t go through a licensed agency  because of the cost.  While I have written in the past about the Medicaid problem of hiring aides directly and paying cash (7/20/09 post), there is another very real risk, safety.  The following story is one, unfortunately, I have heard more than once.

Mary found an aide to care for Dad through an agency she had learned of from a friend.  I know many of the quality licensed agencies in the area but had never heard of this one.  Mary paid a fee to the agency, who sent an aide to her dad’s home but her financial dealings with the agency ended there. She paid the aide directly in cash.  I cautioned Mary that she didn’t really know anything about the agency or the person they were sending but she said she interviewed the woman, who seemed pleasant enough.  And Mary was in a bind because Dad had run out of money so she was paying out of her own pocked.  Now the aide she had found herself and whom had stayed with Dad for 3 years was going back to her native country.  Mary needed to find someone quickly and cost was a real issue.

What happened after one month was Mary’s worst nightmare.  On one of her daily visits to Dad’s home she found him bruised and battered, in a semiconscious state.  He had been beaten by the aide, who claimed not to know what happened.  Mary called the police. They immediately arrested the aide and Dad was transported to the hospital.

Upon further investigation, Mary discovered that the agency was neither licensed nor insured.  The owner disappeared, probably to reappear under another agency name.   And unfortunately Dad’s injuries were of a severity that he could no longer stay at home, but needed nursing home care.  Mary felt terrible, but her predicament is hardly uncommon.  When trying to make ends meet safety was compromised.  Bringing a complete stranger into a home to care for a defenseless senior should not be taken lightly.  Background checks must be done.  Training is important.  There is a reason going through a reputable agency is more expensive. 

However, if a long term care plan had been put in place, well before Dad needed care, perhaps Mary would not have been strapped for cash.  Dad would have the money to pay for his own care, maybe government benefits could have been tapped to help out. Mary would then have hired the licensed agency, safety precautions would have been taken, and a tragedy could have been avoided.

Let’s pick up where we left off with Mary.  Her son, Jim is unemployed and Mary has been giving him funds totaling $50,000 over the last 6 months to help him pay his bills.  And she intends to continue doing so until he finds a job.  While Mary is 70, healthy and not thinking she’ll ever need long term care, I explained to her that if her health takes a turn, the transfers to Jim will make her ineligible for government benefits should she run out of money.  That is a very real possibility, with the cost of care currently averaging over $100,000 per year in her area.  So what can we do?

 We can set up a trust to which Mary transfers assets.  The trust then provides the funds to Jim.  Now, you may be thinking, “doesn’t this create the same problem Mary already has by giving Jim money each month or two?”   Yes, but by having Mary transfer the money in one lump sum Medicaid’s 5 year lookback is applied one time so we know when it will expire.  If she transfers a little bit at a time Mary creates a new 5 year lookback for each separate transfer.  But isn’t there a potential Medicaid penalty when the trust gives money to Jim?  No, because Medicaid only looks at Mary’s transfers, not the trust’s.

 Some may read this and conclude that this is just a way for Mary to avoid using her money for long term care and have the government pay her bills instead.  But is that really what is going on here?  Cleary not.  Mary isn’t even thinking about long term care (although she clearly needs to).  Through the use of a trust she can accomplish both goals, helping her son get back on his feet and providing for her own needs.  If she gets sick she’ll definitely need to use some of her funds for her own care but when she spends down completely, if done properly, she will be ready for Medicaid.  And that benefits not only Mary, but also the providers of her care who will receive those benefits, whether it be a nursing home, assisted living facility or home health care agency.

 The long term care provider will know that after Mary spends down her assets she will qualify for Medicaid without any surprise ineligibility periods imposed by Medicaid. And Mary will know that she can be there for her family and still meet her own needs.  Mission accomplished.

Mary had been reading my blog posts for some time now about the need to plan ahead for long term care. Something struck a chord with her and she called.  She has a home and about $200,000 in investments.  While still healthy, she is 70 and thinking about the future.  I then asked her if she had made any gifts to her kids or grandkids.  She replied, “No gifts but I am helping out my son Jim a little bit because he has been out of work for 6 months”.

 “Well, Mary, actually, the money you are giving your son may disqualify you for government benefits down the road, should you need them”, I explained.  Mary became exasperated.  “Jim has had such a tough time finding a job in this economy.  How can the government tell me I can’t help my family when they are in need?”   The reason for this, if you have been reading my posts over the past number of months, is the Medicaid spend down rules.  The government wants you to spend your money on your own long term care first, before asking for assistance.

 Now, not all your money must be spent on long term care.  But it must be spent in such a way that you are getting something of equal value back.  Mary heard this and in an exasperated tone cried, “what could provide me greater value and satisfaction than helping to keep a roof over my son, daughter-in-law and grandchildren’s heads and food on the table, until Jim can get back on his feet?  My parents helped us out when my husband lost his job.  In tough times our family has always pulled together and pitched in.  Jim is a good son.  He just needs a break.”

 While you and I may view Mary’s help as essential and proper, unfortunately the government does not.  Mary estimates that she has given Jim $50,000 over the last 6 months and intends to continue to do so.  Right now, however, she has a potential Medicaid penalty of about 7 months and that will only increase if she continues to advance funds to Jim.

 Mary is really getting agitated now.  “So are you telling me I have to stand by and watch Jim lose his house -- that I can’t do anything?”  “Not at all”, I replied.  “You can be there for Jim, but we have to do it in a way that won’t create long term care problems for you down the road.”   In next week’s post I’ll share with you what I told Mary.

On September 1, 2009 New York’s new power of attorney law became effective.  There has been much written about it.  The intent of lawmakers was to correct the financial abuses that seem to increase in frequency, probably due to the aging of our populace.  As with any new law, however, what lawmakers envision and what actually occurs often differ greatly. But, what does the new law mean for you?

 First, let’s run through the major changes.  One of the biggest changes is the creation of a “statutory major gifts rider”.  This is a document separate from the power of attorney that specifically authorizes major gifts and other transfers (defined as greater than $500 per person per calendar year).  No longer can the principal (the person executing the power of attorney) authorize gifts in the body of the power of attorney document.  This will impact many long term care plans in which assets are placed in trust, for example.  If the principal can no longer make the transfer and a child, as agent under power of attorney, needs to complete that transaction, New York law now requires this separate rider.

 A second  important change focuses on the execution of the document.  Now the principal and the agent must sign the document in front of a notary and two disinterested witnesses.  The signings need not, however, occur at the same time.  The agent may sign at a later date than the principal.

 A third major change is one that at first might not seem like much.  Any new power of attorney automatically revokes all previous power of attorney unless the principal expressly states otherwise in a special “modifications” section.  This could really wreak havoc upon estate and long term care plans.  Think about it.  How many times have you gone into a bank and executed a limited power of attorney appointing a family member as agent for a particular account?  If that document doesn’t expressly state your wish not to revoke your general power of attorney or any other limited power of attorney that you signed previously then they all are revoked.  What if the bank employee doesn’t point this out to you?  They may not even be aware of this provision. 

It will be interesting to see what impact the new law will have.  Will it correct financial abuses of the elderly?  Will it be too restrictive and hamper families in their ability to care for elderly members?  Will there be any unintended consequences that nobody foresaw?  And will other states follow suit?  One thing should be clear.  Consult your elder or estate planning attorney before you execute any other powers of attorney.

One of the more common questions asked of me is “should I take Social Security early?”.  The questioner is referring to the ability to take Social Security as early as age 62, rather than waiting till the full time retirement age of 65. (By the way that age gradually increases for those born after 1937 until it reaches age 67 for those born 1960 or later.)  Taking early Social Security reduces your monthly payment by ½ of 1 percent for the number of months before age 65 you start those checks coming.  If you enroll at age 62 you will get roughly 75% of what you would receive at age 65.  Ok, those are the basics. So, what’s the answer?

 Well, it depends.  There isn’t a “one size fits all” solution here.  But let’s analyze this a bit.  One consideration is going to be, “How long do I think I will live and what is my break even point?”  For example, if I wait until age 65 to take my benefit how long will I need to live before I come out ahead by giving up a lesser benefit at an earlier age?  That may also be impacted by what I do with the money if I take it early.  If I have sufficient other income and I invest the Social Security that will affect the calculation.

But, wait.  That’s not the only consideration.  If I am still working when I take an early benefit I can lose some of that Social Security if my income exceeds a certain level (this changes from year to year).  And, what about my spouse?  When one spouse dies, the surviving spouse is entitled to receive the larger of the two checks.  So that may work into this as well.

 As you can see, there are many things to consider.  There is a certain amount of guesswork involved as well.  The best answer I can give, however, is to consult with your professional advisors – financial, tax and elder law – to run some numbers.  What is best for you will most likely not be best for the person seated next to you.  There are just too many variables for there to be one right answer.  But, one thing I can unequivocally say is that you should “run the numbers” before you reach age 62.  It might be right for you and you wouldn’t want to pass up that opportunity if it makes financial sense.

The caller gives me the following fact pattern or some variation.  Mom’s health is deteriorating.  Her behavior is becoming extremely erratic, in some cases violent or abusive.  In some cases it’s dementia.  In others it’s alcohol or the side effect of the medications she is taking.  Bills go unpaid.  Spending is out of control.  The house is falling into disrepair.  The family has spoken to Mom but hasn’t gotten anywhere.  She refuses to sign a power of attorney or health care directive or take any direction or assistance from family.  The caller would like to know more about guardianship.

 I listen patiently and then start by explaining that guardianship isn’t suitable for everyone.  And it isn’t easy to obtain.  Now that can be a good thing, but it also can be a bad thing.  You see, the first step in seeking guardianship is a decision by a court that Mom is incompetent, that she legally cannot make decisions for herself.  We have a long history of individual rights in this country.  Taking away that freedom is not something we take lightly.  So the process of declaring someone incompetent is not an easy one.

 Mom has to be examined by two doctors who must agree that she is incompetent. (The exact process may vary from state to state.)  Then the court appoints an attorney to represent Mom.  The attorney must meet with Mom and report back to the court.  And here is where the problem usually occurs.  If Mom is aware of what is going on, she may object to the process.  She may become angry with her children and tell her attorney to go back to the judge and tell him she doesn’t want to be declared incompetent and that she will fight it. 

She tells the attorney that her decisions are hers to make.  Her children may think she is incompetent but where is the line between bad decisions and mental incompetency?  It is not an easy one to draw.  In many cases I must tell the children that attempting a guardianship will probably fail.  Even worse, it may drive the parent away from seeking or allowing the children to help, actually making the problem worse.  In those cases, then, what other options are there?  More on that in next week’s post.

Long term care for people suffering from Alzheimer’s Disease and other progressive, degenerative neurological diseases comes in many forms.  In past posts I have discussed nursing homes, assisted living facilities, adult day care and home care administered by professionals and family members.  Another type of care that you may or may not have heard of is called respite care.  This type of care is as much for the caregiver as it is for the ill family member.

 

For so many people care is provided by family members.  As anyone who has provided this level of care for any length of time knows, it is an exhausting task, both mentally and physically.  It is a full time job, but not one typically limited to 9 to 5 hours.  It is often a 24/7 task and the toll, especially if the caregiver is a healthy, but elderly, spouse, can be harsh.  That’s why respite care is so important.

 

Respite care is a form of short term relief for the primary caregiver.  That caregiver may need time away to “recharge the batteries” or to address his/her own health issues.  There are various programs and services available to provide care to the ill loved one while the caregiver is taking a break.  This can range from home health care to adult day care to overnight care in a licensed facility such as an assisted living facility or nursing home.  The care is temporary, usually a period of days or weeks at a time.

 

Financial aid for respite care may also be available through the Alzheimer’s Association’s Greater New Jersey chapter.  The program will provide reimbursement of up to $1000 in respite care expenses incurred during the 3 month period beginning on the date of acceptance into the program.  Eligibility is not limited to people with Alzheimer’s but is open to individuals suffering from other related progressive, degenerative, neurological dementia.  While funding for the Caregivers Respite Care Assistance Program is limited it does not require disclosure of financial information.  And there is no downside to applying.  If funds are not available when you apply, your application will be kept on file for 12 months. For more information go to www.alznj.org.  If you live outside the Northern and Central New Jersey area check with your local Alzheimer’s Association chapter to determine if a similar program is available where you live.

In discussing long term care planning with new clients, very often they will tell me that they have everything covered because years earlier they set up a living trust.  Living trusts are estate planning devices designed to eliminate the need to probate an individual’s estate at his/her death.  In the 1990’s they were especially popular and still are very common, especially in states such as Florida and New York, where probate is time consuming and expensive.  But are they useful for long term care planning purposes?

Most likely, not.  Living trusts are usually revocable, meaning that when a grantor or settlor (the person establishing the trust) transfers assets to it he/she has the ability to take the assets back out at any point in time.  People believe that when they make transfers to the trust, these assets are not counted as theirs for purposes of qualifying for Medicaid or VA Aid and Attendance benefits.  That is just plain wrong.  If the trust gives you the ability to take the asset back out of the trust, the government will say “go ahead and take it back, spend it all down and then when it is gone come back to us.”   The trust has to be irrevocable, meaning assets transferred to the trust cannot be taken back out by the grantor.

A second reason living trusts (or other trusts, such as testamentary credit shelter or bypass trusts, won’t work for long term care planning purposes is that they usually contain a clause providing that the trustee can use the assets for the “health support and maintenance” of the beneficiary.  Again, if the beneficiary needs long term care the government will look at the trust and point to that language.  “Long term care needs are health, support and maintenance,” they’ll say, “so spend it down and then come back to us when it’s gone.”

So, what’s the solution?  If you have read previous posts on this blog you know that first of all, the trust must be irrevocable.  Now, that makes people uncomfortable.  “Does that mean I am giving away my assets and losing control over them?”   The answer of course, is no.  What I tell people is that the purpose of this transfer is not to give away assets because you may very well need some (or all) of them, depending on what your health needs are.  But you can qualify for government benefits that can help pay for care.  Not knowing how long you will live, the challenge is to protect your assets so you don’t run out of money.  Tapping into other sources helps accomplish that goal because you are spending down your own assets less rapidly. 

 Additionally, the trust language allowing distribution of assets by the trustee to the beneficiary has to be tailored very carefully so as not to jeopardize eligibility for government benefits.  It all adds up to a trust that avoids probate and addresses long term care planning needs.
 
 The bottom line when it comes to living trusts is to get proper advice before jumping into one or if you already have one.  Seek the advice of a qualified elder law attorney who can discuss every option with you.  A living trust may meet your particular needs.  But then again, it may not.

As I often tell clients, one of the most important documents that everyone should have is a power of attorney.  A power of attorney allows you to designate someone to conduct financial and other transactions on your behalf.  The ease with which anyone can execute such a document is a positive but can also be a negative because of the risk of it being abused.  And therein lies the problem when it comes to being accepted by a third party, such as a financial institution or bank.

 When we prepare a power of attorney for a client we draft it with the client’s needs in mind as well as the mindset that we may not have another opportunity to redo it later so it must be as broad as necessary to cover all possible scenarios in which it may be used by the agent.  We also tell clients that when their agent presents the document to a bank or other financial institution the first reaction may be that the bank will want our client (the “principal”, that is, the person signing the power of attorney in favor of the “agent”) to execute another power of attorney on their own form.

The bank’s reason is usually a concern about liability – being sued for honoring an invalid power of attorney.  However, the law provides a measure of protection for both the principal and the bank.  New Jersey law states that a bank must accept a power of attorney that conforms to the law unless the principal’s signature is not genuine or the bank has actual notice that the principal has died, the power of attorney has been revoked or the principal was under a disability when the document was signed, meaning he/she wasn’t competent to sign it.

The problem presented to clients is that the bank employee is usually following bank policy set by their legal department that they want the principal to sign their own document, typically in front of one of their own employees.  Obviously, this makes it easier for them to be sure the document is valid but it  frustrates the purpose and benefit of the law, that the principal can sign one document to cover all scenarios.  Persistence with the bank employee and sometimes intervention by the elder law attorney will usually overcome this resistance and convince the bank to honor a valid power of attorney. 

It helps to know a little bit about the law because the person you are dealing with at the bank probably doesn’t and will tell you they are simply “following bank policy”.  But this policy is not at all helpful to the client, especially in situations in which physical frailties prevent him/her from physically appearing at each bank to execute a separate power of attorney.  That’s not to say that there aren’t legitimate concerns about agents abusing their power.  It’s just that a “one size fits all” approach is the easy way out, instead of a careful examination of the facts of each case.

As I have written previously, in speaking with families, overwhelmingly the desire is for elderly family members to remain in their own home as they age and face declining physical and mental health.   But, is that always the best thing?  Perhaps, not for everyone.

 I was reading a recent post on the New York Times New Old Age blog (www.newoldage.blogs.nytimes.com) which highlighted two cases in which elderly parents were living at home in declining health.  One was a 95 year old woman living in her own home with a team of aides and other assistance, all coordinated by her overwhelmed daughter.  The other was an elderly man suffering from Alzheimer’s Disease, living in the basement of his son’s home.  The woman had visitors and activity in her home every day.  The man did not, spending most of the day alone watching television.

 The two cases raise some interesting questions.  Would the elderly man be better served in an assisted living facility or at least, adult day care?  He is not getting any mental stimulation through most of the day, which, if received, could slow down the progression of his disease.  There is the safety issue as well.  He remains at home in the basement for long hours unsupervised.  What if there is an emergency?   Will help arrive in time?

 The elderly woman would seem to be better cared for.  She has visitors in and out of her home throughout the day.  But, her daughter is coordinating all this care.  It sure sounds like a full time job.  And then we learn that the daughter, herself, is 74 years old.  How is this affecting her health and what happens if she needs care?  Finally, I wonder what Mom’s finances are?  All this assistance can approach and exceed the cost of care in a facility.  Will she run out of money and if so, what happens then?

 As 77 million babyboomers begin turning 65 in 18 months, long term care will continue to be a major issue families will have to wrestle with.  And, I am not saying that remaining at home shouldn’t be the goal for many.  However, as with most complex problems a one size solution does not fit all.  Assisted living facilities and nursing homes will always have a place in the continuum of care and may just be the right fit for some.  Food for thought and a different perspective to consider.

Continuing Care Retirement Communities (CCRCs), are communities that provide a full continuum of care for their residents.  They have flexible accommodations designed to meet their resident’s health and housing needs as those needs change over time, offering independent living, assisted living and nursing home care, usually all in one location.

            As a requirement for admission to most CCRCs, residents are required to pay an entrance fee or a lump sum “buy-in” which, in addition to other things, guarantees the resident’s right to live in the facility for the remainder of his/her lifetime.  In addition to the entrance fee, residents pay a monthly service fee. 

            The entrance fee is often, but not always, reimbursable (at least partially) if the individual moves from the facility, passes away while a resident at the facility, or otherwise terminates the contract.  Many contracts also contain a provision wherein an individual is able to use a portion of the entrance fee towards monthly resident charges if the resident exhausts his resources and becomes otherwise unable to pay.

            The concept is a very appealing one.  The resident knows that as he or she ages and needs increased care it will all be provided by the same organization, usually in the same location.  There are certain risks, however, that make it unsuitable for many. 

The CCRC is promising to provide care over a potentially long time frame without knowing exactly how much it will cost or when it will be needed.  The concept is something akin to insurance.  The company must make projections as to how many of its residents will need what level of care at any one time.  But so many things can go awry.  What happens if too many people need nursing home care at one time?  What about the rising cost of long term care?  What happens if residents run out of money?  Or the CCRC runs out of funding?  Certainly possible in today’s world, where not even big financial companies like Prudential or AIG are safe.

            Because of all these contingencies the CCRC contracts have many so called “out” clauses.   When you buy into the community there isn’t an iron clad guaranty that no matter what you’ll be able to stay.   Under some scenarios you may run out of money and be asked to leave.  This risk is especially present when husband and wife move to the community together.  If one spouse needs nursing home care for an extended period the couple may spend down their assets towards that care, leaving the health spouse with not enough to cover his/her care.  In some cases the entrance fee can be used for that care but then what?  Is Medicaid a possibility?  Maybe, but usually the resident must satisfy certain conditions imposed by the CCRC in addition to Medicaid eligibility rules.  It depends on the terms of the contract.

            It is, therefore, very important to review the contract (which can be 40 pages or more) with an elder law attorney before signing and go through these different scenarios.  If you put all your financial eggs into the CCRC basket, what happens if that basket springs a leak?  It is a good idea to have an emergency plan in place.

 Medical science has made great strides in the last 30 years.  We are certainly living longer.  Illnesses and injuries that in the past resulted in death, now do not.  However, the recovery period can be a long one, especially for the elderly, whose recuperative abilities are not the same as younger patients.  As a result, patients remain hospitalized longer and bounce back and forth between nursing home and hospital, in so many cases.

 That’s where the long-term acute care hospital or LTACH, comes in.  General hospitals are typically paid a standard fee for a diagnosis so they earn more for a quicker patient discharge.  At the same time, the patient may not quite be ready for a subacute facility in a nursing home, which focuses primarily on rehabilitation but can’t provide the medical care of a hospital.  The LTACH can bridge that gap.  Patients receive the benefit of physicians on duty around the clock as well as nurses, respiratory therapists, case managers, physical and occupational therapists, dieticians and pharmacists, all on staff.  LTACHs provide more nursing care than on a medical-surgical floor of a hospital but less than is provided in an intensive care unit.

 Many LTACH patients use ventilators to breath and are recovering from multiple medical conditions such as heart failure, major surgery, etc.  They may have developed complications such as bed sores.  The specialty hospital can concentrate on weaning the patient off of the ventilator or providing wound care, for example, that can require weeks of care, that the general hospital won’t receive payment for.  For those on Medicare, LTACHs are covered under Part A.  The average stay in an LTACH is 25 days.

 There are over 400 LTACHs nationwide and 8 in New Jersey.  Most are housed in general hospitals, however, some are freestanding, such as Select Specialty Hospital in Rochelle Park, New Jersey which is owned by the same company that also owns Kessler Institute, the facility that specializes in the treatment of spinal cord injuries.  The long term acute care hospital is definitely an option families should explore for their critically ill or catastrophically injured loved one.  It may very well improve the recovery process and increase the chance that a loved one can ultimately return home, the end result that we all want to achieve.

Whenever we meet with new clients, especially married ones, I always want to review the estate planning documents that they currently have.  Sometimes those documents are 10, 20 or 30 years old.  Other times, the clients will say, “Oh, we just had our wills updated in the last year so we’re good there.  Yet, when I review the documents, I find that they are not suitable for their current needs.  How can this be?

 Very simply, no one considered how long term care costs can completely destroy an estate plan.  As I have explained in previous posts, when one spouse needs nursing home care and the other does not a spend down must occur.  The healthy spouse gets to keep one half of the couple’s assets up to a maximum of $109,540 and a home, if he/she is living there.  The ill spouse can then get Medicaid.  But, what happens if the healthy spouse dies first?

 Well, in most cases the will provides that everything is left to the surviving spouse and then to the children after the second spouse dies.  Or, perhaps, the will establishes a bypass trust for the surviving spouse, to save on estate taxes.  In either case the assets will now be accessible to the surviving spouse who is on Medicaid.  One of two things will happen.  Either the assets must be given to the State to pay back Medicaid benefits received and the surviving spouse can continue to receive benefits. The alternative is to terminate Medicaid and begin private paying for care until all the assets are spent and then reapply for Medicaid.

 Neither scenario is very appealing and need not happen if we modify the will.  Instead of leaving everything to the surviving spouse we leave the assets to a trust for that spouse, but, and here is the key, a trust that will not be counted for Medicaid eligibility purposes.  Now, those assets are available to be used for other needs not covered by Medicaid.  And when the surviving spouse passes away, there will likely be something left to pass on to the next generation, an important goal for many families.

 Does this mean that everyone should set up their will in this manner and that leaving everything to your spouse is the wrong thing to do?  Not necessarily.  What I am saying is that you do need to sit down with an elder law attorney who is well versed in the long term care system.  You may have a will that was suitable for your needs at the time it was created but things change and your plan may need to be changed too.  You may be leaving yourself vulnerable.  The State says you have to spend down most of your assets towards long term care.  With a poorly drafted estate plan you may end up spending all of your assets towards care, something even the State doesn’t require you to do.  

In my last post I explained how Mom’s transferring her home to me during her lifetime will result in capital gains tax whereas passing the home to me after she dies can reduce or even eliminate the tax.  However, Mom considered transferring the house because she wanted to protect it from being consumed completely by the cost of long term care, especially important where other family members live in the home.(See my posts on 2/23/09 and 3/2/09). 

Right there is the dilemma.  What to do?  Capital gains tax, at worst, will never consume the entire proceeds of sale.  Long term care, however, could easily exceed the home value if it is needed for several years.  But do I have to really choose between the two?  Well, maybe there is another way.

 Putting the home in a trust, if set up properly, can accomplish both goals.  The home is removed from the parent’s name and, if done 5 years or more before needing long term care, will be outside the Medicaid lookback, that time frame within which Medicaid looks to confirm that you have in fact spent all your money and haven’t given it away.  At the same time, the trust can be set up in such a way that the assets it holds will be part of Mom's estate and she will be able to take advantage of both the capital gains tax exclusion and the step up in basis that I discussed in my last post.

 We accomplish the best of both worlds.  The home can be protected and tax advantages will not be lost.  But, there are even more potential benefits.  Since the home is not in the child’s name but in the trust, it is not subject to the child’s creditors, or to being split with the child’s spouse in a divorce.  Additionally, if Mom needs care within 5 years of the transfer, the home can be sold or borrowed against to help pay the cost of care.  In other words, some of the asset can be used for care but not all of it need be consumed.

 As you can see, a simple question, or so you thought.  Is home transfer right for you and your family?  Well, that depends on many factors, including the health of the parent, what other assets exist to pay for long term care and what goals the parent and child want to accomplish.  One thing is for sure.  Planning early makes things easier and the outcome so much better than waiting until a crisis hits.

"Mom wants to transfer her home to me.  Do you think it’s a good idea?"  A seemingly simple question and one that is probably one of the more common questions I am asked as an elder law attorney.  But, not one that I can answer without knowing more.  One size does not fit all.

 The home is typically the largest asset people have and they are frequently and understandably emotionally attached to it.  The primary residence also enjoys special tax treatment and that is what most people fail to consider when they make the decision.  Let's run through the basics.

 Real estate, like stocks, bonds and other investments, is subject to capital gains tax.  If Mom bought her home for $100,000 and sells it for $500,000 she has what is called a "realized gain" and Uncle Sam will want to tax her on that gain.  The gain is calculated by taking the amount she sold the home for and subtracting the “cost basis”.  The cost basis is her purchase price plus capital improvements (eg. addition, new roof, windows, siding) and closing costs.

 In my example, if Mom made no improvements her gain is $400,000.  The capital gains tax she must pay is based on her tax bracket. The higher the bracket the higher the tax, although capital gains tax rates are lower than for regular income.  Let’s say her tax rate is 20% so her potential capital gains tax is $80,000.  I say “potential” because, if the home was her primary residence in 2 of the 5 years before she sold it then she can exclude up to $250,000 of gain.  Married couples can exclude $500,000 of gain.

 If Mom transfers her home to me and I don’t make it my primary residence then when I sell I won’t be able to exclude any capital gains from tax.  But, Mom still intends to live in the home.  I don’t want to sell it until after she passes away.  Is there a way to avoid the capital gains tax, entirely? 

Yes, by invoking something called the “step up in basis”.  If Mom owns the home when she dies and passes it to me upon her death my cost basis when I sell is not what she paid for it, but rather what it was worth at the time of her death (or, alternatively, 6 months after her death).  If I  sell it immediately after she dies my capital gains is zero, and thus, there is no tax.  If I sell after Mom dies, but she transferred it to me during her lifetime, then I owe Uncle Sam capital gains tax. 

So, then that’s it, right?  Mom shouldn’t transfer the home to me.  Well, not so fast.  What if Mom gets sick and needs long term care?  We’ll tackle that one in next week’s post.

So often, when working with families who are struggling to care for a loved one with dementia, the most frustrating part is the uncertainty of the condition from day to day.  The recent case in Minnesota of Verne Gagne highlights that very clearly.

 

            Verne Gagne was a prominent professional wrestler in his day with the American Wrestling Association, in the 1960’s and 70’s.  He eventually lost his big stars, such as Hulk Hogan and Jesse Ventura, to the World Wrestling Federation. He is now 82, and suffers from Alzheimer’s disease, residing in a nursing home.  That is where he had an altercation with a 97 year old resident and put a wrestling move on the resident, slamming his body to the ground.  The other man broke his hip and died several weeks later.  The police are investigating the incident but there is a consensus of opinion that Mr. Gagne should not be charged with a crime because he didn’t know what he was doing.  A tragic story but with similarities that are all too familiar to families who have loved ones with Alzheimer’s.  It is the uncertain, sometimes violent and erratic, behavior that can be most frustrating and frightening. 

 

Although no one can be sure what caused Verne Gagne to act in the way he did, we know that Alzheimer’s patients very often lose their short term memory but are able to conjure memories of events and people 40 or 50 years ago or more.  Gagne’s skill as a wrestler made him more dangerous than the average resident.  Firstly, he was more physically fit than the average resident.  Secondly,  while he was losing his short term memory, he was prone to recalling events from his past, such as his days wrestling.  Perhaps it is that memory, programmed into his brain, that caused him to perform a wrestling move on his co-resident.

 

            It is the unpredictability that often turns a family’s world upside down,.  Dad can be living comfortably in a facility one day and the next he can become extremely agitated and aggressive, causing the facility to ask the family to move him because they can’t accommodate his needs, or because of concern for the safety of other residents.

 

            It is just another reason why families cannot wait and react to a loved one’s long term care needs.  When possible, preventative measures need to be taken.  So often, we see families plan as if Mom or Dad’s current condition, while tragic and upsetting, will remain static, unchanging.   That is usually far from the case and misjudging the situation can be worse than anyone imagined.

 

Who knows what could have been done to prevent Verne Gagne from acting out, although, there was at least one previous altercation between the two residents.  The lesson to be learned on a broader level, however, is to recognize the unpredictability of Alzheimer’s, and dementia in general.  Take action before, not after, it becomes necessary.  I am sure everyone involved in Verne Gagne’s case is reexamining what they could have done differently.   

As we discussed last week, Joe wants to transfer his home to Jim, who lives there with his wife and children.  But let’s change the facts a bit.  Joe is not healthy but has the early stages of dementia and needs some in home assistance.  It is possible that within 5 years he will need nursing home care,  so we are concerned about the 5 year Medicaid lookback.  What options do Joe and Jim have?

 One possibility is for Jim to buy the home at a price that he can afford but that may be below fair market value.  If, for example, he purchases the home for $200,000 and it is worth $450,000, then $250,000 is considered a gift subject to the Medicaid transfer penalty.  Jim can spend down the $200,000 for his care but if he runs out of money then Jim may need to cover the cost of care until the 5 year time frame expires.

 Now that Joe lives in Jim’s home, they could enter into an agreement for Joe to pay rent.  If Jim or his wife is providing care that Joe otherwise would need to hire an aide to do, then Joe could pay Jim to do it.  This is what is called a personal services contract.  Food, utilities, and other goods and services that Jim may be providing, can and should be paid for by Joe.  Perhaps the home needs to be modified to allow Joe to live there.  Jim could spend money to make those improvements when they become necessary, borrowing against the home. 

Some or all of these strategies may be ways for Jim to, in essence, pay Joe for some of the remaining uncompensated value of Joe’s home, over time, in a way that may be more affordable for Jim.  However, each of these financial arrangements must be in writing.  That’s because Medicaid presumes that any transfers of money or services is a gift, subject to a transfer penalty, unless it is in writing and at fair value.

But, a word of caution.  The Medicaid rules are complicated.  What will work in one state may not work in another.  What may suitable for one family may be entirely the wrong solution for another.  If you try to do it yourself and get it wrong, you may find yourself with a lengthy period of Medicaid ineligibility and no money to pay for care.  You need a knowledgeable and trusted elder law advisor to guide you through the maze of laws and regulations that leave hidden traps for the unwary.

Home ownership has long been a large part of the American dream.  Through the course of the 20th century, the percentage of Americans owning their homes rose considerably.   In many of these homes three generations lived under one roof.  Today, there still are many 3 generations homes.  The reasons for it are the same.  The grandparents often help care for their grandchildren while the parents are working.  Sometimes the grandparents need assistance and can’t live alone any longer. 

There is, however, a big difference between the households of the 20th century and those of the 21st century, which generation owns the home.  The parent homeowner of the 20th century now is the grandparent homeowner of the 21st century. 
 
 So now that homeowner, we’ll call him Joe, is in his 70’s.  His son Jim and Jim’s wife and kids live with Joe.  They are concerned that as Joe ages and needs long term care they may lose the house.  Jim wants to buy a house but can’t afford it, even in today’s depressed real estate market.  So they come upon a solution.  Joe will transfer his house to Jim or perhaps sell to Jim at a reduced price, maybe enough to pay off Joe’s mortgage.  Jim will have a home of his own to raise his family and Joe will have the support of family should he need it.  A win – win scenario for everyone.  Right?

 Well, not so fast.  If Jim doesn’t pay fair market value for the home then the uncompensated amount is treated as a transfer for less than fair value should Joe need Medicaid benefits in the next five years to pay for long term care. 
 
What to do?  Joe and Jim must understand that if Joe needs care there must be a plan in place to cover the cost of that care.  That plan could involve VA benefits if Joe is a veteran.  It could also include using Joe’s funds to pay for his care and long term care insurance benefits.  But, if these sources of payment still leave a gap then Jim will need to borrow against the home to pay for Joe’s care, which may mean putting off tapping into the equity to pay for renovations or other expenses. 

Provided these contingencies are covered, however, the home transfer can work well.  What happens, however, if Joe is not healthy when contemplating a transfer, but instead has dementia and already needs some care.  In that case, the home transfer is a little more complicated but I’ll address that in the next week’s post.

Mom and Dad are living in their home but their health is failing.  They do not yet need nursing home level care, but do need some assistance on a daily basis.  Their children are running back and forth helping to provide care but it is just too difficult to do on a long term basis.   The plan is to move them to an assisted living facility.  The problem, however, is that they have limited funds to pay for that care.  While they intend to sell the home, that won’t happen overnight.

An option that has worked well in the past is to take a home equity line of credit and use it to pay the monthly assisted living fee and real estate taxes, insurance and maintenance until the home is sold.  Except, in today’s economy  with the financial industry itself being bailed out, banks are no longer approving these loans, concerned about the creditworthiness of borrowers and the risk of default.  So what now?

It may be time to look at a reverse mortgage.  Increasingly, this is the only option for seniors.  The concern about defaulting loans is not an issue because, by its terms, a reverse mortgage won’t be repaid until the borrower dies or sells the home.  The ability of the borrower to repay isn’t a factor because he/she makes no monthly payments.  Hence the term “reverse”.

Over the years I have seen many cases where reverse mortgages have enabled seniors to stay in homes they really couldn’t afford any longer and probably should have sold.  If they outlive the funds borrowed, typically they are in poor health and now have exhausted their assets completely.   It is also true that these loans carry higher transactional fees than traditional mortgages.

However, here, the plan is to sell the home as soon as possible to pay for the next level of care, not hang on too long.   And, if a traditional mortgage isn’t an option any longer, the higher fees become acceptable given the alternative of the children taking money from their own savings to pay the cost of Mom and Dad’s care.  With an economy in recession and unemployment rates at their highest in a generation many children don’t have the funds to pay for their parents’ long term care. 

That’s why for many, it may be time to take a closer look at the reverse mortgage.

 

When I talk with people about long term care and the Medicaid program I sometimes hear very strong opinions that "it is wrong to transfer assets in order to qualify for Medicaid to pay for nursing home care".  The person making the statement, however, typically hasn’t really given any thought to what that means in real life situations.

 Let me give an example.  Mom is 85 years old and living alone.  While she clearly shows the signs of aging and should have put in place a plan in case she needs long term care, like most people, she hasn’t considered it at all.  She receives a $100,000 inheritance from her brother.  She has always considered her family first, ahead of her own needs, and wants to transfer this inheritance to her son, who is struggling to make ends meet and just lost his job.  She believes she has everything she needs financially and her maternal instincts are to help her child.  You may or may not believe she is being foolish in her thinking but it is her genuine belief.

 Times are tough.  Families do what they always do.  They pitch in and help each other out.  Except that if Mom gives this money to her son and needs nursing home care in the next 5 years she won’t qualify for Medicaid because of the transfer.  So, is Mom trying to beat the system, transferring assets to qualify for Medicaid?  No, I think we all would agree that this is not what is motivating her.  But it’s not that simple.  It never is in the real world.  Mom ought to be thinking about her long term care needs but she isn’t. 

 Had she consulted with an elder law attorney she could have set up a plan that would allow her son to receive the inheritance (or she and her son could share the inheritance)  by setting up a trust.  And when I sat down with Mom and explained to her what would happen if she needs long term care, she very quickly agreed that it was not a good idea to simply transfer the inheritance to her son.  She just had never had that conversation before and no one ever explained it to her in that way.

 So, instead of having that conversation after she received the money, if we had it before the inheritance had been received, my advice to Mom would have been to keep the money in a trust, in case she needs it for long term care, but that it would be possible to transfer some of it to her son, should he need it.  We would have to manage the trust very carefully but it is clearly doable.  I wouldn’t call this beating the system. It is a case of families pulling together in times of need.  Isn’t that what families are supposed to do?

Mom is in her late 40's and divorced.  She owns her own home worth approximately $250,000 but with a substantial mortgage with a balance of $150,000.  Probably describes a lot of people.  Except that Mom has Alzheimer’s.  While the disease mostly affects the elderly, early onset Alzheimer’s is not uncommon.  It is hereditary and can hit people in their 30’s.

 I received a call from Jane, her daughter.  Mom can’t work and has no income.  The home is a mess and falling into disrepair because she can no longer take care of it.  She is temporarily living with her father who is in his late 70’s.  He pays the mortgage, taxes and upkeep on her home, although he is getting on in years and his health is failing.  The family has no direction and is just living day by day with no idea when the nightmare will end.

 Jane asked if we could help save the home.  Could the home be transferred out of Mom’s name?  My answer, unfortunately, was no.  “How long ago was Mom diagnosed”, I asked.  Jane told me it was about 3 years ago.  Mom refused to consider moving and Jane and her grandfather have been supporting Mom to this point but now they have reached a point where that is no longer possible.

  So now the home is on the market.  But after closing costs and paying off the mortgage there isn’t much left.  She was also hoping to recoup for herself and her grandfather the money they spent supporting Mom.  Most importantly, there is the matter of providing care for Mom, hopefully in an assisted living facility at a cost of $4500 per month.  When Mom’s condition worsens the next step is a nursing home and that costs $9000 per month.

 I sympathized with her but didn’t have any magic solution.  She simply waited too long before making what no doubt are tough decisions.  So what should she have done?

 3 years ago when the diagnosis was made is when the family needed to act.  Selling the home and/or moving assets into a trust and out of Mom’s name would have made sense.  Because there is a 5 year lookback for Medicaid benefits the family would need to manage Mom’s care and costs during that time period.  But, managed correctly, they could have had assets left after 5 years, in trust, that could be used together with available government benefits to get the best care possible for Mom.  They would have had options.

Now, they are selling a home falling into disrepair, in a down market.  Not the best scenario for Mom who needs as much money as she can squeeze out of the sale to provide for her future care.  A lesson for us all.  If we delay making tough decisions they only get tougher.

 I felt the despair in Jane’s voice.  “How can our country let this happen?”, she asked.  I didn’t have an answer for that one either.

A very common scenario we see is what I’ll call the case of the late in life second marriage.  We all need companionship, especially after a spouse has died or after going through divorce.  It’s lonely being alone.  So we have Joe and Mary.  They marry in their 60’s.  He has 2 children from a previous marriage and she has 3 from her first marriage.

 2 years later Joe’s health starts to deteriorate.  It’s looking like he will need long term care.  Mary comes to see me.  “I love Joe but I am concerned for myself as well”, she says.  “Will his long term care needs eat up our assets?  We entered into a prenuptial agreement before we married.  I had much more financially then he did.  So please review it and tell me my assets are protected.”

 

I first explain to Mary that before the prenuptial agreement can protect her assets she must first get divorced.  A prenuptial agreement basically is a contract that predetermines, in the event of divorce, how assets are to be split.  In most cases the parties take back what was theirs and split what they acquired jointly during the marriage.

 Let’s go back to our couple.  Joe doesn’t have much and very quickly will run out of funds and need to apply for Medicaid.  But, the only way Mary can preserve her assets is to divorce Joe and you can be sure that the State is going to look very closely at that prenuptial agreement before they approve Joe for Medicaid.

 I explain all this to Mary.  This isn’t much of a choice.  She loves Joe and emotionally can’t reconcile divorcing him in his time of greatest need.  “Is there any alternative?”, she asks.

 Actually, there is.  She can move her assets to a trust and after 5 years Joe can qualify for Medicaid.  In this way she can spend as much of her assets for his care as she wants but not be forced to spend it all, leaving nothing for herself to live on or to provide for her own long term care needs.

When is the ideal time to do that? Really, she should have consulted an elder law attorney before or shortly after the marriage. In her case, it still isn't too late since it doesn't appear that Joe is close to needing long term care yet. However, the longer she waits the smaller that window of opportunity becomes.  A little preventative medicine can go a long, long way.

Adult Day Care is a wonderful alternative for families struggling with the care of an aging or disabled parent, spouse or loved one.  Adult Day Care centers can also provide supervision and assistance each day for a senior who is not quite ready for assisted living or long term care.

Each center has a staff of trained health care professionals, including registered nurses and therapists, to help those members with complex physical or psychological problems and needs.  Adult Day Care centers provide a structured program that includes a variety of health, social and supportive services in a safe, protective environment.

Services are provided during daytime hours allowing caregivers the peace of mind they need to continue working or simply providing them with a much needed respite so they’re able to face the challenges of day to day care giving.

            Members of Adult Day Care centers can look forward to a variety of challenging, interesting and entertaining activities each day.  Their caregivers can feel confident that excellent medical and therapeutic care will be provided by an experienced staff of healthcare professionals.  Most centers provide a light breakfast or morning snack, lunch and an afternoon snack.  Operating hours can vary but most centers operate during standard working hours, Monday through Friday 8 am to 5 pm.  Some centers have extended hours are open on weekends and holidays.

            For those individuals who meet the requirements, Medicaid, Veterans Administration and other funded programs cover adult day care services.  Long term care insurance policies may also cover the cost of adult day care centers so it is important to examine your policy carefully.

In the sixth installment of his podcast, Elder Law Today, Yale Hauptman invites guests Heidi Rinsky Schnapp and Lisa Cook Bayer of Life Management Resources, an elder care consulting firm and Gregory W. Bushwell, of B & M Brokerage Services, a long term care insurance specialist to a roundtable discussion on long term care.

The panel first discusses preplanning options and Greg shares his advice on long term care insurance products and services. Learn why there is no such thing as one size fits all when considering the amount of insurance coverage for long term care, what pitfalls to avoid when purchasing long term care insurance, what additional services besides nursing home care are covered and the difference between disability insurance and long term care insurance.

If you or your loved one is already in the midst of a long term care crisis, then you’ll want to hear Heidi and Lisa discuss with Yale the types of services their elder care consulting firm provides. You’ll learn how elder care mediation can help families stay out of a public and expensive legal battle. Heidi explains what geriatric care managers do and how they can help families separated by long distances. Lisa shares with the audience what daily money management services are and how essential they can be for the elderly.

Yale then takes listener emailed and live call in questions as he and his guests discuss the goal that each of us wants to accomplish when we face the aging process, that is, to age in place and remain in our homes as long as possible.

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Heidi Schnapp Lisa Bayer  Life Management Resources
Life Management Resources 973-533-0839

Greg Bushwell  B & W Brokerage Services
bushwellorg@yahoo.com 973-716-7594

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A recent study of long term care shows that the percentage of elderly Americans living in nursing homes is on the decline.  This appears to be in part because of improved health and partly because of more choices.  According to census statistics, 7.4% of Americans 75 and older lived in nursing homes in 2006, down from 8.1% in 2000 and 10.2% in 1990.  At home care and assisted living facilities, on the other hand, have been growing.  Of the 85 and older group, fewer than 16% are now living in nursing homes, down from 21% 20 years ago.

As the oldest of the 79 million baby boomers turn 62 this year the long term care system is going to be overwhelmed in the next 20 years.  Nursing homes will always be a necessary and important part of that system but if given a choice most people would prefer in home or assisted living care as an alternative.  The numbers bear that out. 

But what most people don't realize is that unless you have enough money to cover the cost of nursing home level care out of income then you run the risk of running out of money.  So, here's what happens.  You spend your money and when it is all gone you'll get government benefits.  If you want that care at home or in an assisted living facility, however, government benefits will not pay for the entire cost.  You'll need to pay for the part that the government benefits won't cover.  But, of course, you don't have the money because you spent it all in order to qualify for the benefit program.  A classic Catch 22.  The only place where the government benefits will pay for 100% of your care is in a nursing home.

So, how can you avoid this dilemma?  By planning ahead and moving your assets, out of your name, to a trust for your benefit.  This way your assets are available to pay for some of your care at home or in an assisted living facility but you can qualify for whatever government benefits are available and you are able to stay out of the nursing home.  But you can't wait until you need the care because transferring assets may cause you to be ineligible for government benefits. So you have to do it well in advance of when you might need the care.

Who can help you put this type of plan in place?  A qualified elder law attorney.  If done properly you are actually maintaining control of your future, exactly at a time when most people who didn't plan ahead lose control because their health no longer allows them to manage their own affairs and they haven't set down a plan of action.  And as you can see, the system drives you into a nursing home, unless you plan for the alternatives.

Two weeks ago New Jersey became the third state (California and Washington being the others) to pass into law a bill requiring companies to offer paid leave to employees.  The benefit will operate in a similar fashion to state disability benefits in that all employees will contribute an additional amount from their paychecks to help pay for this benefit.

Employees who are caring for a newborn or a newly adopted child are eligible.  In addition, however, employees caring for a sick family member can take the leave, which can be as much as 6 weeks.  Companies are concerned about the impact the law will have on their businesses if key employees exercise this option.

The law highlights what has become increasingly obvious, that as our population ages more people are caring for elderly loved ones than ever before.  77 million baby boomers will be reaching senior status in the next 20 years.  While the paid leave bill, attempts to, in some way, address the crisis, it is clearly not the best approach.  Employees who must take time off from work  are dealing at that point with a full blown long term care crisis.  It often begins with a call that Mom or Dad is in the hospital, then leads to the need for nursing home care, home based care or assisted living care.  It is never best to deal with a problem when it has reached the critical stage.

The better approach is to address long term care issues before they arise, in what we call the preplanning stage.  Usually, the signs of aging can be seen long before the crisis hits.  If families can sit down and, with the assistance of an elder care attorney and other elder care professionals, prepare a plan before the need arises, chances are the employee will not need to take leave, or perhaps may need to take less time off.  Preplanning also reduces stress levels for all involved and leads to better care. 

In the fourth installment of his podcast, Elder Law Today, Yale Hauptman, a practicing New Jersey elder law attorney, discusses how long term care planning actually decreases the likelihood of ever needing nursing home care.  Learn how the long term care system actually works to push people towards nursing homes when they have no more money.   Medicaid home based benefits often pay only a part of the cost of aides needed on a 24 hour 7 day a week basis, but will pay the entire cost of care if provided in a nursing home setting.  It is, therefore, important to plan ahead to have the funds available to be able to stay at home.

Yale also reviews for listeners an unknown Veterans Administration benefit for eligible Veterans that can provide as much as $1800 per month in additional income to cover the cost of home aides and assisted living care.  The Veterans Aid and Attendance program can help qualified seniors preserve their much needed assets.  But Yale cautions that one must keep an eye on the next level of care so as not to jeopardize eligibility for other benefit programs down the road.  This requires the coordination of a long term care plan to meet all levels of care, not just the current one.

In the second segment Yale interviews Angie Hicks of Angie’s List, a website offering reviews by consumers of local home improvement contractors.  Yale and Angie talk about how Angie’s List is seeing more inquiries in recent years by children who need help finding services for their parents who live long distances away.  Seeing the aging of America, Angie tells Yale that Angie’s List now offers ratings of various elder care services to assist families who are faced with the task of caring for the elderly members of the family unit from a distance.

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A term that has come into increasing usage is "negative inheritance".  It describes the situation where an adult child, rather than receiving an inheritance when a parent dies, instead spends his/her own money to cover the parent's long term care needs because the parent has run out of money.  It is caused by poor, or in most cases, no planning and is entirely avoidable.

A common scenario that we see is a parent living at home with round the clock home health aides.  The parent has run out of funds, maybe even has tapped into as much equity as can be had from the home.  The children then pay the cost with no end in sight.  Sometimes they take out mortgages on their own home.  Eventually, their spending will have an impact on their own retirement savings and ability to pay for their own long term care needs.  The financial toll can be devastating, causing them to turn to their children for help when they run out of funds, a never ending cycle.   

So, how can it be avoided?  By the parent planning before long term care is needed.  There are various government benefits that can be tapped to help pay for care.  However, each program has its own set of rules that easily trip up the average person.  With some careful planning, eligibilty for much needed benefits can be achieved.  You never want to run out of money, especially before you reach the highest level of care, nursing home care.  If the parent is home and runs out of money then getting into a quality nursing home, should it be needed, can be difficult.  The only way to insure that will happen is to private pay to get in the door.  But if you've spent all the money before you get there that's where the children are faced with a dilemma.  Do we let the state send mom somewhere or do we pay privately to get her into the facility we want her to be in.

Proper planning can also increase the likelihood that the parent can stay out of the nursing home.  If you need round the clock care and have no money the government will pay for it if you go to a nursing home.  However, in many states, if you want that same care at home, the government won't pay for it all.  Of course, if you've spent down everything to get the government benefits you don't have anything left to pay for what the government won't.  That's where the planning helps.

The lesson to be learned is that the earlier you plan the better prepared you'll be.  Because so much of the long term care system of benefits and laws is state specific it is important to consult with an experienced elder law attorney in the state where you live.

Over the past 13+ year I've been able to help many families through what we call the elder care journey from healthy vigorous senior through home assistance, assisted living and nursing home care.  Some of the more common mistakes that I see people make are the following:

1.  Believing Medicare covers long term custodial nursing home care (it does not);

2.  Thinking that a transfer of $12,000 per person per year will not cause Medicaid ineligibility (there is no gift tax but there is a Medicaid transfer penalty);

3.  Failing to account for transfer penalties and loss of control of assets when trying to protect assets (I've seen disastrous outcomes because of it);

4.  Failing to consider negative tax consequences and disruption of estate plan when transferring assets;

5.  Transferring assets without providing a plan for where sources of funds will come from should long term care be necessary within the next 5 years after the transfer;

6.  Confusing the Medicaid lookback and transfer penalty (they are not the same);

7.  Believing that it is too late to plan (it rarely is);

8.  Failing to recognize the sense of urgency in doing long term care planning by telling yourself "I'll wait till it looks like I will need long term care" (the earlier the planning the more that can be protected);

9.  Believing that long term care planning means I will lose control of my assets and my decision making (in fact the opposite is true);

10. Hearing what other family members, friends or acquaintances have done and do exactly the same because it sounds like your situation is identical to theirs (it never is, every situation is unique, just as every person is unique);