Long-term Care Planning - What NOT to do (with transcript)
Attorney Daniel J. Umlauf is a noted speaker on estate planning. Born in Texas, he attended Texas A&M University before meeting his wife in Switzerland and following her back to North Carolina. He was introduced to estate planning and elder law in law school at Wake Forest University when he wrote a grant to help small farmers in North Carolina who were losing family farms in part due to poor estate planning. He began his own firm, Salem Law, in 2010, and practices exclusively in the areas of estate planning, probate, guardianship, and elder law. Daniel serves as a Deacon at Salem Presbyterian Church, and is the Vice President and President-Elect of the Stratford Rotary Club.
Frank Samson: Welcome to Boomers Today. I’m Frank Samson, and as usual, we bring you important, useful information on issues facing baby boomers, their parents and other loved ones.
We have another wonderful guest today that people who are listening are going to learn a lot of great information. And we have with us an attorney named Daniel Umlauf. David attended Texas A&M University. He was introduced to estate planning and elder law in law school at Wake Forest University, when he wrote a grant to help small farmers in North Carolina who were losing family farms in part due to poor estate planning.
He began his own firm, Salem Law in 2010, and practices exclusively in the areas of estate planning, probate, guardianship, and elder law. Daniel serves as a Deacon at Salem Presbyterian Church and is the Vice President and President Elect of the Stratford Rotary Club.
Daniel, thank you so much for joining us on Boomers Today.
Daniel Umlauf: Hi Frank. Thank you so much for having me.
Frank: This is such an important subject, I’m glad we have the opportunity to discuss it. Now, I'm going put you on the spot here a little bit. We’ve seen this statistic everywhere – on the news, in the paper, on the Internet – that says that 40 million people will be turning 65 by 2050.
The statistics also show almost 70% are going need some sort of long-term care before passing. Whether they get life insurance, talk to their families, or make other arrangements, they plan for death. When you read statistics like this, Daniel, explain to me more what is meant by long-term care, number one? And number two, what should people be doing in your opinion to start planning for this?
Daniel: Absolutely. You mentioned long term care and let's just go ahead and define that for the listeners. Long term care is typically defined as needing assistance with the activities of daily living, something that's not going to get better with Rehab. So, if you are a person who needs help with eating, bathing, dressing, getting in and out of bed, in and out of chairs, etc., on a regular basis, and this is something that won’t be improved through rehab, then you're defined as someone who needs long term care.
This is also the time when your health insurance providers are going to stop paying for any assistance that that person needs with getting help with those activities, which by definition they need help with. If you have long term care insurance, they describe it the same way. And if you might be eligible for any government benefits, they define it the same way, as well. So you might be eligible to get help with paying for that care.
We say 40 million more people. That is almost doubled than is in the United States right now. Our population is about 330 million. Almost one in four Americans are over the age of 65, 70% of which at this point look like they're going to need help with long term care. We have to figure out that situation on a number of different fronts, but that's the demographic.
You asked what we can do about it and I certainly don't know at a societal level, but as an attorney I can tell you what we help our clients with on an individual level. Most people when they are encountered with long term care are concerned about the cost of it. In North Carolina where I'm at, in Winston Salem, the average cost is over $93,000 per year for a private room in a you skilled nursing facility, in a nursing home. So we’re looking at people’s savings and saying, "Do we have the $93,000 per year to pay for that care?"
As an attorney, we can help people in a number of different ways. Ideally, if someone is young and healthy, we recommend that they get long term care insurance. It is quite pricey though, so if that’s not an option, there's a number of different legal approaches that we can take.
Frank: You said something so important and I think we need to emphasize it. You had said that if somebody needs long term care at some point from an insurance standpoint their health insurance stops paying for it.
Daniel: Mm-hmm (affirmative).
Frank: And I hear all the time, "Oh, won't Medicare cover my mother or father's needs?" This makes me think that Medicare is health insurance for seniors, and just happens to be paid for primarily by the government. But it doesn't pay for long term care. I also wanted to clarify that by ‘younger,’ you are referring to people under 60.
I mean, for somebody who's in their thirties, it may be a little too soon. But today, there are combination policies of life and long term care insurance, which actually makes it a little more affordable, I know. I just wanted to emphasize those couple of things.
Could you elaborate on the idea that if somebody doesn’t have the money to pay for long term care, or they want to seek other alternatives, that there’s a way to protect their assets?
Daniel: We categorize people that come to us in essentially two groups. We say we do pre-planning, and that is where we are planning for the cost of long term care before we even know if we're going to need it or not.
And then we do emergency planning, when people have a loved one, whether it's a parent or a spouse, who might be unexpectedly going into a long term care facility. This might happen if there’s a stroke or heart attack of some kind that precipitates a hospital stay. And then our loved ones just may not be the same when they come out of it. They might go to the Rehab and if they don't get better, that's when Medicare stops paying and they have move into the facility or receive care at home or an assisted living facility.
To reiterate, there’s emergency planning and pre-planning. Pre-planning is where we want to be. It's cheaper and easier, and it usually involves the use of trusts. What we do is put some portion of their assets in trust. And we know that if we do it early enough, then the assets that we put in that trust can be protected, can't be touched. It sets them up for eligibility for government benefits down the road.
Sometimes, people want to be really aggressive and we put a lot or most of their money behind it. Other times, people just say, "I'm comfortable putting my house and my wealth insurance and this money in the trust and I want to keep the rest out."
And then the other thing we do with emergency planning. Sometimes people will come in with little to almost nothing, thinking that their loved one is going to need to go to a facility soon. We help them figure out if they’re eligible for government benefits and help them preserve as many assets as they can. They're typically families looking at losing everything and we just try to make sure their funeral arrangements are set up, so that that's paid for. We look at whether we might be able to save the house and some portion of the money. I forgot to mention that earlier.
Frank: Yeah. Unfortunately, I’ve run into a number of families that didn’t do any planning before tragedy struck. Mom or Dad need care, and maybe Mom or Dad have been diagnosed with some form of dementia. And now the adult children say, "Well, we need to make some decisions on Mom or Dad." But there's been no planning done whatsoever. What do you, what do you say to people in that situation?
Daniel: Well, every situation is unique, but we would probably first look at the person's health. Maybe with the diagnosis, is it early on and still mild? Or is it advancing quickly? How quickly is it advancing? Are they in good health otherwise or do they have other health complications? What do the family's assets look like? What do they own? Don't they own?
We always put the loved one's care as the number one priority.
Frank: Could a family wait too long? Meaning maybe if you want to get into power of attorney or any of that, and let's just say none of that was set up. Could they wait? Is it possible they waited too long and it's going to be challenging?
Daniel: Sure. Yeah. I think I'd like to address that in two ways. Just sort of the financial part, and then you mentioned the power of attorney and that that is a whole other big aspect of this.
But certainly financially, yes. The emergency planning, we're looking at maybe saving 60% of the assets. That is no guarantee. Talk to your local attorney and get good advice. Everything we do, we disclose. Let's just emphasize that.
And then the power of attorney mentioned. It’s beneficial for the loved one to have someone appointed to be able to handle your affairs financially and/or making decisions for you for health care, for which facility you might be in. It’s good for the individual to make their own decisions for as long as they can.
I like them because the definition legally is about the same as you might find in a dictionary, which is just the inability to handle your own affairs. So if you can't handle your own finances then you're incompetent as to your finances. We need that power of attorney to takeover and start paying the bills at that point.
So to summarize, ideally everyone would get their estate planning documents, at least powers of attorney and wills, perhaps a trust, etc. But it wouldn’t hurt, from the perspective of someone with a high chance of going to a care facility, to appoint the power of attorney, so that you've got the person that you want to make those decisions for you in place in order to be able to just take over as seamlessly as possible.
But if we don't have those we can be in much more trouble. And in thinking about a guardianship, if you're familiar with that term. Many states call it a conservatorship. We've got to go through a long court proceeding to get someone appointed to handle your affairs for you.
Frank: I do want to address that. I ran into a situation that really brought this into light. There was a parent with Alzheimer’s who had no power of attorney, and the spouse assumed that they could make the decisions moving forward. The children assumed that they'd be able to provide Mom with all the assistance to help in this planning. But this wasn’t the case, and maybe you could expound on why they would run into some trouble.
Daniel: Yeah. I hear that story unfortunately over and over again.
One, the spouse doesn't really have the authority to make the decisions for their loved one. A company may have talked to that spouse in the past leading them to think that they would be able to do that, which is tragic. I think as soon as the bank hears the word ‘incompetent’ or ‘power of attorney' or any term related to a disability, even just old age, they get scared and want to protect their own interests, even if it means misleading their customer.
Oftentimes the spouse will find him or herself in a pressure cooker situation where they are needing to write a check for the facility that is demanding the first month or two months or three months payment up front in advance. And this is the first time they're learning that they aren't able to access those funds. So it’s very important to know that spouses do not have the automatic right to do that. Typically they do not have the right to do that, unless some documentation has been signed to do so.
If a power of attorney hasn't been put in place, a guardianship or conservatorship proceeding is necessary, which is much more costly and cumbersome. It involves having the person typically checked out by a psychologist, a medical doctor and a social worker to go out and see their home and interview them, to see if they are competent, and to bring in their testimony into the hearing and testify before the judge what they believe about that person's competency.
And after we have established that they are incompetent, then we have to move on to determine who's in the best interest to name for that person. Sometimes it's fairly straightforward if the spouse is in good shape. Other times, the children fight among themselves to figure out who is the best person to name, and the proceedings can get ugly.
Frank: Yeah, I can see how that would be challenging. Now, I want to shift gears a little bit, and ask for your opinion on something else.
When you hear somebody say, "Well, you know, I know that we wanted to get maybe Mom approved on Medicaid or in California we call Medi-Cal, but I think she probably has too much money. So we've been slowly moving that money over to my account and my sister's account. And all of that,” I'm sure it makes your hair stand up on edge. Can you just elaborate on that and why that is something families should not do?
Daniel: Yeah, absolutely. And thank you for raising a really good point.
Let’s say a family has $200,000, that's their money. They're looking at long term care. They say, "I'm going to give it to my child in May." They move it over to their child. Medi-Cal and Medicaid, who we're dealing with is going to, when they apply for that, is going to require that they show, the family shows five years of financial statements, to see if anything has been given away in that period.
What a lot of people don't realize is that you can incur a penalty. You do incur a penalty for any money given away. You can make yourself ineligible for benefits for about eight and a half years. You see, families who do this can really get into some trouble.
Frank: I see, that's all the more reason why a family should be using attorneys like you and others in the same field, maybe in their particular areas. So with that, I could talk to you quite a bit longer Daniel, about the subject matter because it's so important, but unfortunately we're running out of time here.
If you could share with our listeners, how could somebody get in touch with you or your firm?
Daniel: You can find us online at salemestateplanning.com. So www.salemestateplanning.Com. Salem like Winston Salem and I know you have listeners nationwide and even internationally, feel free to reach out to us. We are a member of a couple of different national organizations. The Estate Planning and Elder Law Attorneys. We're happy to make referrals to folks that we're very comfortable, typically have had a lot of education each year.
Frank: Thank you Daniel Umlauf, for joining us on Boomers Today. I also want to thank everybody out there for joining us as well. Talk to you all soon.