The Deficit Reduction Act of 2005, signed into law this February, purports to provide more power to seniors. Some say, however, that this legislation puts a huge kink in the Medicare and Medicaid funding pipeline. From now on seniors will be paying higher co-payments for reduced services, with substantially higher deductibles on all plans.
To help supply some solid solutions to this and other issues facing seniors — and anyone with a parent in this category — the New Jersey State Bar Foundation offers a free seminar on “Strategies for Protecting Older Citizens” on Tuesday, May 23, at 10 a.m. at the New Jersey Law Center in New Brunswick. Register at www.njsbf.com.
Presented in recognition of Senior Citizen’s Law Day, the conference features former chair of the NJSBA Elder Law Section, Bridgewater-based attorney Lawrence Friedman, who provides advice on funding long-term care without going broke after the deficit reduction act; attorney Brenda McElnea, also a NJSBF Elder Law past chair, who has offices in West Orange, speaks on surrogate decision making with advanced healthcare directives; and Cynthia Sharp Myers of the Sharp Law Firm in Haddon Heights, who discusses living trusts and explains why they are not for everyone.
Friedman came by his penchant for law the old fashioned way — he inherited it. He grew up on Long Island with a father who was a business and tax attorney. Heading for his father’s trade, he graduated from SUNY Binghamton with a bachelor’s degree in economics and attended NYU’s School of Law. Here he earned both a J.D. and a master’s of law degree in taxation.
“Somewhere throughout school, I realized that I really loved law, but saw it much more as an instrument for helping individuals than business,” Friedman says. In l981 Friedman hung out his shingle in a solo practice. Since then he has specialized in the many plights facing older and disabled citizens. He was honored for helping draft legislation that helped New Jersey citizens employ special needs trusts to preserve disability benefits. Friedman continues to fight the elder law fight, both as a frequent speaker and in his private practice.
Long term care refers to assistance given an individual when he is permanently, or nearly permanently, unable to handle his own daily affairs. It may be as simple as help bathing and cooking, up to the constant surveillance of an Alzheimer patient. Though the line may see vague, long term care is unlike healthcare recuperation in that the later has a foreseeable end. Long term assistance is available from family, government, and the for-profit sector.
“Elder law is a creature of Congress, so don’t expect contract logic and common sense rules,” says Friedman. Still, many laws governing the treatment of seniors have great benefits along with their pitfalls. But everything is changing, and Friedman’s best suggestion for preparing for a happy, healthy old age is to plan earlier than you think and to get the most current advice.
In your 50s. The day you receive your first “AARP Magazine” should be the signal that you are mortal. There is a race going on between your life expectancy and your assets, and you are betting, whether you like it or not. It is time to estimate your future worth by stacking up your eventual pension, investment growth, home sale potential, and possible inheritances.
Be aware that this wealth faces attack by dwindling pension, Social Security, government healthcare benefits, and inflation. It is too early to crystal gaze for exact figures 30 years hence, Friedman says, but you should get a picture of roughly how golden your senior years will be.
While there’s no need call on an elder care attorney just yet, this is the time to visit your general counsel with a legal checklist. Wills for yourself and spouse, powers of attorney and living wills, along with other healthcare provisos, should be established. This is also the time to investigate trusts and extended gifts to family and charities,which, if initiated early, may afford substantial tax benefits.
Long term care insurance, first offered in the late l960s, has boomed in popularity during the last decade. Statistical claims for individuals eventually requiring some long term care vary from 40 to 70 percent of the national population. But virtually everyone has at least one relation or acquaintance who has had to face the expensive choices of assisted living or home healthcare.
Most of the long term care insurance plans provide a set amount of dollar coverage per day for a set number of years, applicable to either spouse. For an annual premium of $2,000 to $3,000, a mid-50s married couple would receive about $200 a day upon request for two years during their later life. A policy covering eight years typically runs between $4,000 to $6,000. (The average length of stay in a nursing home is 18 months.)
Friedman says that long term care insurance is a crap shoot. Unlike life insurance, where you are betting on the surety of your death, your need for this is uncertain. “For some people it may prove a good way of preserving funds for their heirs,” he says, “but, interestingly, more people are putting their insurance funds into increased auto accident policies. I guess people are seeing greater risks on the road.”
In your 60s. “Probably the biggest mistake is not coming to an elder lawyer early enough,” says Friedman. Today’s mid-60s retirees are fit and active, and while they may be browsing the senior community brochures, most are not mapping out long term care strategies.
Generally speaking, neither Medicare nor Medicaid offer any long term support. But there are exceptions. Financing of extended home nursing or assisted living may be achieved through Medicare if the individual is a war veteran. Medicaid offers minimal help if an individual has less than $2,000 in total assets and if a couple has less than $3,000 in assets.
In the past, many people got below these levels by deeding assets to their children. But Friedman says that, under the new Deficit Reduction Act, this is no longer possible.
Friedman suggests selecting an elder law specialist to help you map out your golden years, rather than just any general attorney. These specialists can provide individual help for the toughest choice — staying in your own home versus moving to assisted living.
They can also suggest variations on standard legal instruments. For example, instead of selecting a normal durable power of attorney, effective immediately, it is possible to opt for a “springing” version that kicks in following a specific time or event.
Beyond the grave. Keeping the fortune in the family, and out of the government’s hands, remains one of the most desperately sought legal/tax strategies. “Frequently such planning is simpler than people imagine,” says Friedman. With good guidance seniors can share assets before the long term care bills arrive. Fixing up your current home and raising its value, or simply buying a second home for a beneficiary, often provide an excellent means of positing untouchable assets where you want them.
Establishing trusts has been heralded as the ideal way to avoid probate, death taxes, and capital gains. But this is not always a problem-free solution. The setting up of a trust to avoid probate’s costs and its 12-month delay may, in some cases, actually cost more than the state’s probate fees.
The popular idea of putting a child’s name on the title of certain assets, houses, for example, could vastly increase the capital gains he would have to pay if he decided to sell the asset, whereas, if he inherited it, he might or might not have to pay an inheritance tax, but would not have to pay a capital gains tax.
Sheltering assets certainly is possible, says Friedman, but it must be planned for years ahead. And for most people, there is no legal shelter extensive enough to avoid all state and federal taxation.
None of us is enthralled with the prospect of aging. Yet diminishing abilities can certainly be endured more easily with a cushion of cash and an absence of worry. And while hard work and sharp investing are a good start, learning the tactics of long term care are an essential tutorial.