Most of us will spend a significant amount of time planning for retirement. We will make plans on when to take Social Security, how to adjust our post retirement investment strategy, and how to establish a post retirement monthly budget. However, most people will not think about what will happen if we or our spouse gets sick and needs 24 hour care. Whether you are thinking about your own long-term care planning, or are caring for a parent or grandparent, there are certain costly elder care mistakes you can avoid.
Mistake #1: Not realizing how much care costs.
Many people think that caring for someone at home is cheaper than placing them in a facility. Good, quality and reliable home care can cost up to $20 an hour. Most home health agencies have a 4 hour minimum per day. Twenty –four hour home care can be over $14,000 per month. If you or your loved one is able to bear weight, then assisted living may be an option. Most assisted living facilities start at $3,500 a month, and then the facility may charge additional monthly fees for services such as medication assistance and continence care. Skilled nursing home care can cost up to $8,000 a month. The American Association of Retired Persons at aarp.org, has a listing of how much care costs in different parts of the United States. For detailed and personalized care assessments and housing options, consider hiring a care manager. Care managers are typically social workers or nurses that work as private consultants to help identity the best place to receive care, and how much the care will cost. Care managers usually charge an hourly rate of $95-$125 per an hour. Caremanger.org has a list of care managers nationwide.
Mistake #2: Not knowing what insurance does and does not cover.
Medicare will cover rehabilitative nursing care after a hospital stay for a short period of time, but it will not pay for long-term care on a permanent basis. If you or your spouse develops Alzheimer’s disease, dementia, or other types of serious care issues that requires regular care on an ongoing basis, this type of cost can be devastating to a lifetime of savings. Most private health insurance plans also have limitations on paying for long-term care services. As part of a retirement plan, a review of the possibility of purchasing long-term care insurance with a financial advisor is a good idea.
If you or your loved one cannot afford long-term care insurance, or are uninsurable for coverage, consider seeing what public benefits you may be eligible for under the federal Medicaid program. Medicaid has special provisions for married couples, and people with special needs children that allow them to preserve assets and/or transfer their assets and still qualify for long-term care benefits. An Elder Law attorney will be the best resource for discussing what option will work best for your family. For a list of elder law attorneys near you, see the National Academy of Elder Law Attorneys at NAELA.org.
There are also benefits available to pay for long-term care through the Veteran’s Administration for Veterans or the spouses of Veterans who have served at least one day in the service during a period of war. There is no requirement that the Veteran be injured or disabled during his or her service.
Mistake #3: Not having financial and medical powers of attorney.
One of the most important documents to have in place before a health care crisis is a financial power of attorney. Even if you are married, you will need to have a financial power of attorney to buy and sell property on behalf of your spouse, access their retirement account, and make financial and business decisions.
Having a medical power of attorney is also advisable. A medical power of attorney can list the person or persons you want to make medical decisions for you, and what order they will serve in.
Without a financial or medical power of attorney, if you or your loved one becomes incapacitated, then it may be necessary to obtain guardianship. Guardianship is a legal process where you gain authority to make financial and medical decisions for a loved one through the probate court. Guardianship can be a timely and expensive process to establish and maintain year to year.
Financial and medical power of attorneys can be obtained by an attorney, and there are online services that offer low cost documents. However, should you choose the online route, you should have the completed documents reviewed by an attorney.
Mistake #4: Not coordinating your beneficiary designations.
Your Will and/ or Trust will pass your assets at your death to the people or charities of your choosing. However, beneficiary designations will trump the plans in your Will or Trust, and must be reviewed on a regular basis. Failure to review and complete the beneficiary designations can result in your retirement plan or life insurance going to the wrong person at your death, or seriously disrupt your estate plans. You should review each asset’s beneficiary designation with your attorney, financial advisor, and tax professional to ensure the asset goes to the correct person, and fits with your overall estate plan.
Mistake #5: Not addressing family issues before a crisis.
With people living longer and healthier lives, second and third marriages later in life are more common. While the opportunity to enjoy a successful partnership later in life is wonderful, children from prior marriages and relationships can wreak havoc on the best thought out estate plans. If you remarry and update your financial and medical powers of attorney, Will or Trust, you should let your children know about the changes so there is no confusion on who will be in charge in case of a health crisis. You should also let your children and family know how the estate will be divided at the death of the first and second spouse. Additionally, if there are family heirlooms such as antique furniture, memorabilia, or other personal items that may be fought over after your death, consider giving them away now or putting in writing how you want these items distributed.
These issues are tough to think and talk about, never mind actually do something about. However, with a little advanced planning, mistakes that cause financial problems and family heartache can be avoided.