Q. My wife and I signed basic wills in our 40s when our concern was passing our assets to our children in the event of death. However, we are now both in our mid 70’s and we are now more concerned about the cost of long-term care for ourselves. Should we now redesign our estate plan to address our long-term care concerns?
A. That’s a great question and one that is being asked by seniors with increasing frequency. In approximately 1900, the average lifespan was about 47 years, and through most of the last century planning for death made sense and was often accomplished by signing a basic will. As computer automation brought the cost of setting up trusts within the reach of average Americans, we added probate avoidance and minimizing death taxes to the equation. As lifespans continued to increase throughout the last century and the prospect of incapacity became a growing concern, we next added durable powers of attorney to the typical estate plan in order to designate an agent to manage our finances in the event we could not do so ourselves.
But the average lifespan now is approximately double what it was at the turn of the last century and the concern now is not just about planning in the event of death or a short period of incapacity. Rather, the concern today is how to pay for the cost of long term care without running through a lifetime of savings and placing one’s family at financial risk. Consider that the average cost of a nursing home in our community is approximately $8,500 per month per person and most seniors are not insured to cover that expense. Consider, also, that Medicare at best provides only limited nursing home coverage.
The new question many seniors are asking is whether there is a way to create an estate plan which can also help fund the cost of long-term care. The good news is that the answer in many cases is “yes”. The new model upgrades the traditional estate plan so as to permit you or your spouse, in the event of need, to accelerate eligibility for public benefits to help fund the cost of care, while still preserving hard earned assets as a kind of safety-net for your loved ones. In some cases, the plan involves creating a “standby” Special-Needs Trust for a spouse as part of your will. In every case it involves creating new public benefits planning powers in your estate planning documents, and coordinating your trust, will and power of attorney so that they work together in a very special way. But advance planning is often the key to accessing these benefits, as traditional estate planning often falls short of the mark.
To be sure, public benefits planning is not just for low income persons. In fact, as a matter of public policy, when Congress created the Medi-Cal program it did so in part with the purpose of helping middle-class persons avoid spousal impoverishment and preserve a measure of financial dignity.
For singles and married couples alike, it is no longer just about “death planning”. With increased longevity, the new paradigm is a Long Term Care Estate Plan which enhances the “traditional” estate plan by also enabling access to public benefits, if necessary, to help cover the cost of long term care and to provide a “safety net” to avoid impoverishment in our elder years.