Elder law is a natural expansion of a traditional trust and estate practice. By expanding his or her practice to include elements of an elder law practice, the trust and estate attorney will be able to serve a much larger client base, thus increasing the size of his or her own practice. In addition, because of the overlap in clientele between an elder law practice and a traditional trust and estate practice, it is important that the trust and estate attorney be able to recognize elder law issues and advise clients appropriately. By doing so, the trust and estate attorney will be able to offer better overall service to his or her clients.
Elder law issues are complicated, and the need for competent elder law attorneys is growing along with our elderly population. Currently over 40 million Americans are over the age of 65, and that number is rapidly increasing. People are living longer than ever before. The availability and complexity of government programs designed to assist our aging population are also growing, while the need for traditional complex estate tax planning is decreasing as exemptions grow. Furthermore, rising costs of health care and the increasing prevalence of debilitating diseases such as dementia make proper elder law planning more important than ever. All of this means that the need for competent elder law attorneys will only continue to grow.
Elder Law Goals and Values
Elder law attorneys take a holistic approach to preserving their clients’ autonomy and freedom through effective financial and estate planning. Given the longer life spans described above, such planning should be designed to last, in most cases, 30 years or more.
The attorney’s emphasis should be on the client’s quality of life. This means planning for and promoting adequate acute and long-term care options in the event that the client’s health begins to deteriorate. The attorney should assist the client to establish surrogate decision-making plans that help prepare the client for incapacity. It is important to discuss with the client and the surrogate decision maker the client’s preferences for long-term care and the level of consideration that estate preservation should receive in the decision-making process.
Income During Retirement
Most clients will have three primary sources of income during retirement: Social Security, 401(k)/IRA, and savings. It is important to discuss how best to use these resources during retirement. For example, when discussing Social Security, the attorney should ensure that the client is well- informed about the importance of the three key ages (early retirement at 62, standard retirement at 65 to 67, and late retirement at 70) and the potential advantages of delaying collection of benefits. The amount of monthly benefits a claimant receives will increase over time the longer the claimant waits to apply for such benefits. For example, someone who is entitled to receive $750 per month at age 62 would be entitled to receive $1,320 a month if he or she waits until age 70. Social Security Administration, When to Start Retirement Benefits, Pub. No. 05-10147, Aug. 2012. Depending on the claimant’s life expectancy and immediate income requirements, he or she will have an important decision to make. The assistance of a qualified elder law attorney can be very helpful in making such a decision.
Clients should also be made aware of spousal rights to Social Security benefits. A spouse may be entitled to receive benefits based on his or her spouse’s work record. Again, at what age a claimant receives spousal benefits will affect how much such claimant will receive each month.
While some clients may be financially sophisticated, many will need assistance with understanding their own 401(k) and individual retirement accounts. They will face issues involved with rolling over a 401(k) into a retirement account, or taking over the retirement account of a deceased spouse. The client also may require assistance determining how to convert a savings account into an income stream, or even how to fund a trust. Depending on the attorney’s particular area of expertise, it may be advisable to assist a client with hiring an appropriate financial planner who will work in concert with the planning strategies of the attorney.
Understanding the Medicare program is essential to providing proper advice to clients, and every elder law attorney must know some basic information. Eligibility for Medicare is tied to eligibility for Social Security, but clients do not have to be taking Social Security to qualify for Medicare. Individuals become eligible to receive Medicare at the age of 65, or during end-stage renal failure, or upon having received Social Security Disability benefits for 24 months. Like Social Security, spouses, even divorced spouses, can obtain some benefits based on the other spouse’s Medicare entitlement.
There are four primary elements to the Medicare system: Part A, Part B, Medicare Advantage, and Part D. Each element of Medicare is intended to provide benefits to address a specific type of need. Part A requires no monthly payment and partially covers costs associated with hospitalization, hospice care, and limited skilled nursing home care. Most people qualify for Part A automatically when they turn 65. Part B requires payment of monthly premiums and deductibles and covers the costs of care for doctors and some outpatient services. Medicare Advantage consists of health plans provided by private companies that contract with Medicare to supplement benefits for those who are enrolled in both Part A and Part B. Finally, Part D is offered through private insurance plans and provides prescription drug benefits to enrolled individuals. Together, these four parts make up the system commonly referred to as Medicare.
Where to Obtain It
Planning for long-term care is essential to preserving elderly clients’ comfort and assets during their lifetimes. If asked where most clients would want to spend the final years of their lives, the most popular answer by far would be “at home.” Because of issues related to isolation and the high costs of in-home care, however, many elderly individuals may be better served by an alternative living situation.
There are three primary alternatives to in-home care depending on the client’s care needs. Continuing care retirement communities offer a level of care that adapts with the client’s needs. A client must be able to live independently on entry into such a facility, but as the client’s care needs increase, the facility has the capability to handle those increased needs. One advantage to such a facility is that the client is able to build a level of comfort by residing at the same facility for the remainder of his or her lifetime. Another advantage is that these facilities allow spouses to remain close to one another even if they have significantly different care requirements. The disadvantage is primarily the expensive payment requirements for such facilities. Most of these facilities have extremely high entry costs, often hundreds of thousands of dollars, which are often mostly refundable on death, plus high monthly fees of around $5,000 that rise annually.
Assisted living facilities supply a second option. Such facilities allow residents to live mostly independently, while providing various levels of supportive assistance. While not licensed to provide medical care, such facilities do provide assistance with meals, housework, and some personal hygiene needs. Assisted living facilities often have special dementia units that are designed to prevent wandering from the facility. The cost of this type of facility is typically about half of what would be expected at a nursing home. But this cost can rise significantly if more individualized care is needed.
Nursing homes are by far the most expensive institutionalized facilities providing long-term care. Nursing homes provide a high level of medical assistance, which results in a much more hospital-like atmosphere. Often two or more residents will be placed in each room. Because of the high expense associated with nursing homes, generally more than $8,000 per month, most accept Medicaid. In some major metropolitan areas, nursing homes can cost in excess of $15,000 per month.
How to Pay for It
The three primary means of paying for the high costs of long-term care (other than private pay) are Medicare, Medicaid, and long-term care insurance. Medicare provides only temporary assistance with long-term care, paying for up to 20 days of nursing home care, but only after the patient has spent at least three days in the hospital and met other criteria. For days 20 to 100 in the nursing home, Medicare requires a co-pay of $152 per day, and there is no coverage after 100 days.
Medicaid is the primary means of paying for long-term care for those individuals who are able to qualify. Medicaid is a joint federal- and state- sponsored program, and states are required to meet certain minimum eligibility standards to qualify. Medicaid does not pay nursing homes the standard “private pay” rate but pays a lower rate that varies according to location. Most elderly individuals who qualify for Medicaid do so as “Medically Needy,” meaning that they cannot afford to pay the costs of their own care. The income and asset restrictions vary depending on the applicant’s status as either married or unmarried. While a married couple with one spouse applying for Medicaid may preserve some assets, an unmarried individual must generally expend all of his or her resources to qualify. One of the roles of an elder law attorney is to assist clients in obtaining much-needed health care while preserving assets to help supplement that care.
One way for elderly individuals to plan for long-term care without relying entirely on government programs is through long-term care insurance. This is insurance that covers some portion of the cost of long-term care. As with any insurance, the terms of each policy will vary depending on the needs and desires of the individual. Generally, like health insurance, long-term care insurance pays for costs of care when such costs are incurred on a covered expense. If the beneficiary is forced into a long-term care facility, long-term care insurance generally pays a daily rate, with the beneficiary required to pay any amount over and above what is covered by insurance. Two things that are important to keep in mind are: (1) long-term care insurance becomes more expensive the older one gets and is generally not available to those over 80, and (2) there are many different types of policies on the market today. The assistance of an elder law attorney in reviewing these policies on behalf of clients can be extremely valuable.
Health-Care Decision Making
Elder law attorneys must assist clients with planning for health-care decision making. While capacitated, “[e]very human being of adult years and sound mind has a right to determine what shall be done with his own body. . . .” Justice Cardozo, Schloendorff v. Society of N.Y. Hospital, 105 N.E. 92 (N.Y. 1914). Competent patients must give informed consent to medical procedures, and have the right to limit or refuse life-sustaining medical treatment.
Once a person loses capacity to make his or her own decisions, there are generally two primary types of surrogate decision makers. If no prior planning is in place or other circumstances demand, a guardian may be appointed by the courts. Such a guardian derives his or her authority from the courts and is required to make periodic accounting to the court for approval of all actions. Alternatively, an individual can designate an attorney-in-fact under a durable power of attorney. The attorney-in-fact derives his or her authority from the incapacitated person directly, but such a document must be prepared before the principal loses capacity. The attorney-in-fact does not have periodic reporting requirements to the court.
One way that the incapacitated individual can assist the surrogate decision makers to make appropriate decisions is through the execution of an advance health-care directive, aka “Living Will.” Such a document must be prepared before the client loses capacity. Executed properly, such a document will provide surrogate decision makers and doctors with clear directions regarding the desires of the incapacitated person when he or she is incapable of making an independent expression of those desires.
Physician Orders for Life-Sustaining Treatment are often mistakenly characterized as a living will, or an advance health care directive, but are actually a separate document. This document is created by a physician in consultation with his or her patient and details the kind of treatment the patient wishes to receive toward the end of his or her life. Such documents are intended to be placed with the patient’s medical records and to be binding on all who provide medical treatment to the patient, including physicians, nurse practitioners, nursing homes, hospices, home health-care providers, and emergency medical services. In many states the document is printed on pink paper so that it will be easily noticed. It is important to note that these are not a substitute for an advance health-care directive, which provides more detailed information specific to each individual but should work in concert with such planning.
Special Issues Involving Older Clients
When dealing with elderly clients the elder law attorney must address special concerns. First, potential physical and mental limitations of elderly individuals can force the attorney to adapt his or her representation to the client’s needs. The attorney should always strive to represent the client in as normal a fashion as possible given the client’s particular limitations. The attorney should be especially attentive to “screen” the client for possible issues related to dementia, depression, physical frailty, and especially any indications of incapacity or undue influence by family or friends.
The elder law attorney must be careful to consider the effects of differences in spousal ages, health, planning needs, and attitudes. When spouses are of significantly different ages or health, it is important to plan for the financial future and autonomy of the surviving spouse. Good planning anticipates possible dementia, physical frailty, and social isolation. The attorney also should keep in mind the potential for a possible remarriage by the surviving spouse.
When working with clients who are in a second marriage with a stepfamily, it is important to make sure that both spouses are comfortable with how the children of each of the parents are treated. Often “children” are 50 years old or older, thus making nontax-based generation skipping an important consideration. Also, it may be appropriate to consider the use of trusts in estate planning for such situations. Most importantly, however, the attorney must be extra cautious that planning is done in such a way as to minimize the likelihood of later family disputes.
Any proper estate plan should also include planning for incapacity. Some of the ways in which such planning can be addressed have already been mentioned. Both physical and mental incapacity can necessitate advance planning and asset protection. Such planning can include a durable power of attorney, inter vivos trust, or family partnerships or LLCs. Advance health-care directives and guardian nominations also are important planning tools for incapacity.
A well-informed client will implement advance planning that provides not only for his or her comfort and security in the final years of life but also helps to preserve assets for the next generation. These are the goals of both elder law and trust and estate attorneys, and an understanding of elder law issues will serve to enhance the ability of the trust and estate attorney to assist his or her clients to achieve these goals. Through an expansion of his or her understanding of the available estate planning tools, public benefits, and private resources available to his or her clients, the trust and estate attorney will be able to expand his or her practice while providing enhanced services to his or her existing clients.