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Blogging from Heckerling: Post Five

Will You Still Need Me, Will You Still Feed Me, When I’m Sixty-Four?

Bernard A. Krooks of Littman Krooks LLP presented at the 2018 Heckerling Institute on Estate Planning on the complex issues of long-term care, including the myths and reality of such care. Unfortunately, the United States has no health care system for long-term care and, thus, no safety net.  Long-term care is an issue many families do not proactively address.

Myth: Many folks believe that they will not need long-term care. They say to their loved ones: Do not put me in a nursing home.

Realities:

  1. 40 million Americans are at least 65, which is 13% of the population; 25% of these 40 million Americans will live past 80, 10% past 95.  By 2050, 88.5 million will be over the age of 65, which will be 20% of the population.
  2. For several demographic and societal reasons, it is expected that individuals will not have the option to rely on family or friends as they age, a departure from previous generations; especially elderly women who will, most likely, outlive their spouses and siblings and not move in with their children, resulting in the need for a nursing home or long-term care facility.
  3. The U.S. Department of Health and Human Services expects 70% of Americans turning 65 will need long-term care during their lifetime with over 5 million individuals afflicted with Alzheimer’s; with that number growing to 15 million by 2050.

Myth: Medicare will pay for the cost of long-term care.

Realities: 

  1. Medicare will pay for specific kinds of care such as skilled nursing care to some extent after a qualified hospital stay while custodial care is never covered.
  2. Medicare may cover costs for care resulting from an acute illness, such as rehabilitative care for a limited time, but costs related to chronic illnesses such as Alzheimer’s or dementia are not covered.
  3. Long-term care includes a range of services and support for daily living activities, including, but not limited to, bathing, dressing and instrumental activities such as housework, administering medications and managing money.  It may even include simple tasks normally taken for granted such as using the telephone.

Myth: Long-term care is inexpensive.

Realities:

  • The average annual cost of long-term care exceeds $100,000 and can easily exceed $200,000 in major metropolitan cities.
  • The costs of long-term care may bankrupt middle-class families since Medicare does not cover long-term care and Medicaid has strict income and asset requirements before benefits are provided.

Myth: I am not responsible for my spouse’s care.

Realities:

  1. For this purpose, the marital estate is considered one entity and the responsibility for long-term care for a spouse exists even if finances are separately managed or maintained.
  2. Pre-nuptial agreements with provisions limiting or eliminating responsibly for long-term care are disregarded by government agencies.
  3. While divorce will relieve a spouse from long-term care responsibility, the sick spouse’s share of assets will be available to pay for the costs.

Myth: I can make my own decisions.

Realities:

  1. With age, the ability to make financial and medical decisions diminish.  Thus, such issues should be decided through advance directives or a health care proxy.
  2. Without such directives, these decisions may be result in family conflict.
  3. These decisions may become extremely contentious in second marriage situations when the children from a prior marriage do not agree with their parent’s spouse.

Inasmuch as many people do not properly plan for their potential long-term care, families should address this issue together.  With the increased federal estate tax exemption, individuals and families may be more focused on non-tax issues and make long-term care a priority.  The long-term care options available to those who are proactive and start the process early in life will have more choices and better control over their long-term decisions than those who wait!


 Blogging from Heckerling 2018

James A. Jacaruso Jr. is a Personal Wealth Advisory Group Director with more than 25 years of tax compliance and planning experience focusing on personal and fiduciary income taxation, gift taxation and wealth transfer planning.

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