In my experience clients want to know two things: 1) What should I do? 2) What should I avoid doing?
I think most folks get enough of “You Need to do This . . . . ” So no preaching or nagging today. Instead let’s focus on the second one and call that the “mistake” category. What are the common mistakes I see? First let’s set the context.
The context is aging. It is invariably true that as we age we cannot expect to be in control of our daily affairs. The spirit may be willing to be “forever young” but the flesh is weak. That means we need somebody to take care of things for us. Pay the bills, get money out of the bank, manage all medical matters including from making appointments to following through the treatment program. This period of need may run into months or years.
So without further ado, here are the Five Most Common Mistakes.
Some elders don’t do anything because they feel they will lose control. It’s like some people don’t want to do a Will because there is this irrational fear that they will die if they do.
What’s the result of doing nothing? Lifetime probate and that means the probate court must appoint a guardian or conservator to handle the elder’s affairs. One study found that the number one cause of probate guardianship petitions was the need for emergency medical treatment when the patient cannot give consent.
The cost of lifetime probate is enormous. When a full guardian and conservator is appointed the elder loses all control over life. The guardian makes all the personal decisions such as where to live and what medical treatment to have. The elder will not go shopping since the conservator controls all money and property. The conservator will have to file annual accounts of income and expenditures. While that’s protection against mishandling the money, the annual expenses add up. The elder has no ability approve or disapprove. The probate court must approve the account. It’s like being a child again.
Many seniors think they are all set if they have a daughter, son or other person on their bank accounts with them. The thinking goes “that way they can pay the bills if I cannot.” There are many problems with joint accounts.
The first is that it solves only one problem of aging: paying bills. Joint accounts give no authority to contest a bill or help the elder in any other way. If your joint owner calls the insurance company they will ask “Are you the insured?” They will say “No. But, I’m joint on the bank account.” That goes nowhere.
The more serious problem is the risk of loss of life savings. Here we are not talking about thieves but joint owners who have financial bad luck. Suppose the daughter loses her job and so loses her health insurance and runs up big bills. Suppose she defaults on her mortgage too and files for bankruptcy. Any account the parent has with the child is at risk of being lost. A couple years ago there was a news story about a lady who lost $56,000 because her daughter was on her bank accounts and the daughter defaulted on a truck loan to the bank. The bank took the money out of the Mom’s account because daughter’s was considered to be an owner of the funds. The same can go for the house. If your joint owner is sued, divorced or goes to bankruptcy so does “your” house.
And finally, joint accounts can be the source of probate battles after the death. What if you were to make joint account with a long time friend? After you die does the friend have to share with all the people you named in your Will? Unfortunately there are no absolute legal rules and questions like these are often answered after a bitter battle in probate court.
Many people think they are “all set” if they have a Will. From the elder law perspective the answer is “No.” A Will is only effective at death. We are talking about lifetime issues, not what happens after we die.
In the same way people think they all set if they have all the children as beneficiaries on bank accounts. Again that is only preparing for death.
These strategies create no authority to use your account to incur bills, to make any medical decisions or to handle any other business during your lifetime. Instead of avoiding probate these can guarantee probate.
Too often I hear “We found a lady in the neighborhood who can help mom and she wants to be paid in cash. She does not want to pay taxes.” The problem is that under the law this lady is a “domestic employee.” The employer has a whole host of legal responsibilities
Mom is the employer who is legally responsible for withholding income taxes and paying the unemployment and FICA taxes: social security and Medicare and more. In addition the employer must be covered for workers compensation losses.
Suppose the lady falls down the stairs carrying laundry. She can file for workers compensation and have her medical bills and her wage loss paid by the employer – Mom. If we “let her go” because daughter can now do it the lady could file for unemployment. Once these events happen “the government” learns about the employment and then Mom pays everything including back taxes, interest and penalties
Anybody who has filed an income tax return knows that government programs are complicated. That’s because they were written by a committee. A very Big Committee — Congress.
The most common means tested benefits I see are the Veterans Pension benefit, often referred to as “Aid and Attendance,” and Medicaid for the nursing home. The loss of the benefits can be enormous. The Veterans benefit can be over $25,000 a year. The loss of Medicaid coverage for the nursing home can be worth $120,000 in just one year.
The Veterans Pension benefit will be denied if the veteran is too high in “net worth.” Once the veteran presents a claim to the VA and the VA denies it, the veteran is denied for an entire benefit year. Only if his net worth declines because he used the funds for medical expense will the VA reconsider. It’s too late for him to “shelter” the excess. The veteran should have gotten legal advice before making a claim to the VA. And note, the VA will consider a telephone inquiry about the benefit to establish a “benefit year.” If the vet inquires, then disposes of assets and applies, the VA will need proof of net worth as of the date of the phone call. Benefits lost.
Medicaid is even worse. Too often families pay nursing home bills because they were told they had too much money. People are told they must spend all savings down to $2,000 and they think that must go to the nursing home. They are not told that there are many ways to “spend down” that do not involve paying the nursing home and do involve keeping the asset value in the family. One reason why patients and families are not told their options is that the Medicaid program is very complex.
Here is one final problem in this area. It is possible to get advice from the VA or from the Medicaid worker. The problem is they do not represent you. They represent their agency and that means they may not tell you all your options. This point is true of some advocacy organizations, including veteran groups. Because of agency policy they cannot tell you of all your options.
When it comes to these government benefits get the best legal advice.
For the average person a “life care” plan is no more difficult than preparing for “death and taxes.” All you have to do is identify your trusted assistants and give them authority to do what they will need to do – everything. And then make sure they know when to get professional advice. That means they should know when to see a lawyer, an accountant, or an investment, insurance, building and trade professionals among others. Do that and you are 99% there to having aging go as smoothly as it can,
Jim Schuster