Planning for Aging: Essential Elements for Long-Term Care

The term “Aging Care Plan” encompasses a wide range of medical and support services provided to individuals who have experienced a decline in their ability to function independently due to chronic illness or disability. These individuals are expected to require ongoing care over an extended period. Long-term care options include assistance provided at home by family members, with additional support from volunteers or hired caregivers, as well as adult day health care, assisted living facilities, or nursing homes.

It is estimated that approximately 60% of the population will require long-term care at some point in their lives. When compared to the relatively low probability of making claims for automobile or homeowner’s insurance, the risk of needing long-term care in the future is startling. Unfortunately, most Americans either lack awareness of these statistics or choose not to plan for the potentially overwhelming costs associated with long-term care.

In the following sections, we will explore the fundamental documents that form an integral part of a comprehensive long-term care plan.

1. General Power of Attorney The first crucial document is a General Durable Power of Attorney (POA) that includes Asset Protection Powers. Not all POAs are created equal, so it is essential to have this document prepared by an experienced and knowledgeable Elder Law Attorney.

A POA, specifically designed to be durable when used for estate and long-term care planning, grants authority to your appointed “Agent” or “Attorney in Fact” to act on your behalf and sign legal and financial documents. This tool becomes indispensable if you are unable to manage your legal and financial affairs due to age, illness, or injury. Asset Protection Powers embedded in the POA are vital for your Agent to safeguard your assets against the potentially catastrophic expenses associated with long-term care. It is worth noting that inexperienced attorneys often overlook the inclusion of these crucial Asset Protection Powers in the POA.

A well-drafted POA aims to prevent the need for a court-supervised Guardianship proceeding. This process is time-consuming, expensive, and publicly intrusive, involving a court declaring you incompetent and appointing a Guardian on your behalf. Guardians are subject to state law requirements, including the burdensome obligation of filing annual accountings with the court. The acceptance and utilization of a power of attorney vary across different jurisdictions.

1. Advance Medical Directive (AMD) Also known as a Medical Power of Attorney or Health Care Power of Attorney, an AMD empowers another person, known as your “Medical Agent,” to make medical decisions on your behalf if you are physically or mentally incapable of doing so. This document includes provisions similar to those previously found in what was commonly referred to as a “Living Will.” It allows you to express your preferences regarding the use of extraordinary measures to prolong your life in the event of a terminal illness or injury. Through the AMD, you appoint a Medical Agent who possesses the authority to provide or withhold specific medical treatments when you are unable to make an informed decision.

A well-crafted AMD helps avoid the necessity of a court-supervised guardianship proceeding for medical decisions. This process, akin to the one mentioned earlier, involves someone seeking a court declaration of your incompetence and subsequent appointment as your medical Guardian. Simultaneously, they may also seek appointment as your Guardian for legal and financial matters.

1. Aging Care Plan Another vital document in a comprehensive long-term care plan is the Aging Care Plan. This plan identifies your unique needs, preferences, habits, and desires, consolidating all this information into a document that will guide your future caregiver in providing optimal long-term care.

For instance, consider the case of Alice, who included in her Aging Care Plan the desire to be placed in a reputable facility and requested visits with the addition of bringing chocolates if her mental abilities declined due to Alzheimer’s disease or another form of dementia. At the time, her children may have found her request seemingly trivial, but when Alice’s mental capacity did diminish, her instructions were readily available. There was no need for her children to struggle with the decision of whether to care for Alice at home and how they would manage it. Without guilt or uncertainty, they placed her in a reputable facility that met her needs. All they had to do was visit her with love and, of course, bring chocolates, honoring her wishes outlined in the Aging Care Plan.

1. Trusts A comprehensive Long-Term Care Plan typically includes the aforementioned documents, along with the incorporation of a Trust. This can be either a Revocable Living Trust (RLT) or our exclusive Family Trust Plus© (FTP) Asset Protection Trust.

An RLT grants the trust creator (Grantor) full access to trust income and principal throughout their lifetime. Upon the Grantor’s death, the assets can continue to be held in trust or distributed to named beneficiaries, such as the Grantor’s children. While the primary benefit of an RLT is to avoid probate, a well-drafted RLT can also provide protection in the event of incapacity, making it an important component of a Long-Term Care Plan. Similar to a General Power of Attorney, an RLT ensures uninterrupted asset management by the appointed trustee if the Grantor becomes incapacitated. This spares both the Grantor and their family from the costly and complex process of a court-appointed Guardianship. However, it is essential to note that an RLT does not shield assets from Long-Term care expenses. In fact, if necessary, the assets within an RLT may need to be spent to cover Long-Term care costs, even leading to the depletion of all trust assets.

Our trademarked Family Trust Plus© (FTP) is an irrevocable trust designed to safeguard assets not only from probate but also from various financial risks, including lawsuits, nursing home expenses, creditor attacks, and more. The FTP goes beyond traditional asset protection, addressing the specific concerns of the 99% of Americans who are not ultra-wealthy. It shields assets from the significant costs associated with nursing home care, offering comprehensive protection.

Importantly, the Family Trust Plus© does not impact your income or income taxes.

Recognizing the Importance of Long-Term Care Expenses Regardless of wealth or financial status, it is crucial to acknowledge the potentially devastating costs of long-term care, including nursing home care. Nursing homes are among the most common and expensive creditors that individuals may face during their lifetime. Consider the following statistics:

• About 70% of Americans who reach the age of 65 will require some form of Long-Term care at some point in their lives, with over 40% needing care in a nursing home.
• The annual cost of a private room in a nursing home exceeds $120,000.
• On average, individuals who are currently 65 years old will require Long-Term care services for approximately three years. Women tend to need care for a longer duration (around 3.7 years) compared to men (around 2.2 years). Moreover, 20% of individuals will require care for more than five years.
• Long-Term care needs are not exclusive to the elderly. Recent studies indicate that 46% of individuals filing Long-Term care claims are under the age of 65 when they become disabled.

When contrasting these Long-Term care statistics with those related to automobile accident claims and homeowner’s insurance claims, the significance becomes evident:

• Only 7.2% of individuals file automobile insurance claims annually.
• Only 6.15% of individuals file homeowner’s insurance claims annually.

Revocable Living Trusts Fall Short While a revocable living trust is an effective tool for protecting assets from probate expenses, it does not provide protection against the costs of Long-Term care while the individual is still alive. Since the grantor of a revocable living trust retains full access to the trust funds, the assets are also accessible to creditors, including nursing homes and state Medicaid programs.

To address this limitation of revocable living trusts, I have developed a unique solution: the Family Trust Plus©. This specialized irrevocable trust offers comprehensive asset protection, guarding against the expenses and challenges of probate, lawsuits, and nursing home care while the grantor is alive. It provides a wide range of financial safeguards throughout the grantor’s lifetime, including protection against medical expenses, creditor claims, auto accidents, extended hospitalizations, and the significant costs associated with nursing home care.

The Family Trust Plus© is specifically designed to shield assets from these risks and is the only type of self-settled asset protection trust that allows the grantor to retain an interest in the trust while safeguarding the assets from being counted by state Medicaid agencies.

Notably, the implementation of the Family Trust Plus© has no impact on the grantor’s income or income taxes, ensuring financial stability and peace of mind.

In conclusion, when planning for aging and Long-Term care, it is vital to consider the potential costs and challenges that may arise. By incorporating essential documents such as a General Power of Attorney, Advance Medical Directive, Aging Care Plan, and a Trust like the Family Trust Plus©, individuals can proactively prepare for their future care needs while protecting their assets and ensuring their wishes are honored. Long-Term care expenses should not be ignored, as they can have a significant impact on individuals and their families. Taking the necessary steps to plan and protect oneself can provide security and alleviate the financial and emotional burdens associated with Long-Term care.

To learn more about estate planning and elder law, visit Estate and Elder Planning by David Wingate at www.davidwingate.com. For an Initial Consultation, call (301) 663-9230. We can assist you with powers of attorneys, living wills, wills, trusts, Medicaid planning, and asset protection. With office locations in Frederick, Washington, and Montgomery Counties, Maryland, we are here to provide you with peace of mind.

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The information provided in this blog post is for general informational purposes only and should not be construed as legal advice. While we strive to provide accurate and up-to-date information, laws and regulations regarding dementia, estate planning, and elder law can vary by jurisdiction and may change over time.

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