Third critical mistake (and solution) in planning for your long-term care
Continuing our discussion of the five most common mistakes we see folks making before they need long term care, we will turn to the third mistake.
You can find the articles on the first mistake (assuming no long term care will ever be needed) and the second mistake (not having a long term care plan) if you haven’t already read them.
Third Mistake: Not having proper basic estate-planning documents
Estate planning can get incredible complicated with all sorts of strategies. That’s not what I’m talking about. There’s a place for all of that. I’m talking about the basic necessary documents I’ll describe below.
- Power of Attorney
A financial power of attorney and also a medical power of attorney (sometimes it’s called the health care proxy) is where you have given somebody the power to make some decisions for you.
If you do not have that power of attorney or you do not have the right power of attorney and then if you become incapacitated, your family may not be able to take the steps that are necessary to be able to pay for long-term care in the best possible way.
- Advanced Health Care Directive
An advanced health care directive is where you sit down and you lay out in writing:
Do I want life support?
Do I want food and water if I have this type of condition or that type of condition?
That, I think, is very important – not necessarily for how to pay for long term care but the quality of your life.
- Will
A will just says, “Here’s how I want anything that’s left over when I die (that hasn’t otherwise been taken care of) to be distributed.”
Again this is not for how to plan for long term care but you should have a proper will in place.
Solution to Third Mistake: Have the correct documents
- Make sure you have a valid power of attorney
If you look at the solution, it’s basically just the opposite of the mistake. The solution is to have a valid power of attorney. You want one that has the right type of power so that your family or whoever has the power of attorney can make the right decisions for you if you’re not capable of doing that. You can have an accident. It doesn’t have to be Alzheimer’s or dementia. It could be a car wreck and you’re not able to make decisions. This will allow the person who has the power of attorney to make those decisions.
- Update every three years to keep it “fresh”
Here’s a recommendation.
Update it every three years.
Legally, you don’t need to do this.
The power of attorney from 20 years ago is as valid as one that was signed yesterday.
But sometimes we see financial institutions or mortgage companies become difficult for your family to deal with if the power of attorney is more than a few years old.
They will be a little skeptical if the power of attorney has some age to it.
Legally, they should honor it, but sometimes they will give the person who has the power of attorney a lot of trouble.
It just makes sense to me to be smart. Every couple or three years, certainly if you’re still competent and you understand what you’re doing, just update that. Do a new one.
- Understand the significance of the power of attorney
It also is a good reminder for the significance of a power of attorney.
You really need to understand the significance of the power of attorney. If I give you power of attorney for me, then in essence you are me.
If you have that power of attorney – if you have my signature on it and it’s a valid power of attorney – you can walk in to a bank, you can buy property, you can file lawsuits and settle lawsuits. You have all the power that I would have, assuming that I’ve given you all the power.
A power of attorney can be as broad as possible or it can be very limited, so you have to be very careful who you give the power of attorney to.
But if we have somebody, or even more than one person, that we trust and that we respect and that we have confidence in, then we need to look into that.
Having that valid power of attorney can be very important in making decisions that will help us pay for long-term care.
Imagine the some tragedy happens without warning and now you need long-term care. You may have long-term care insurance. That’s great. That’ll pay for three to five years.
If it pays five years, there are some times where we have to go five years after transferring property to be able to legitimately qualify for Medicaid.
If we know we’re in a crisis situation right now, we might transfer property which means, as a practical matter, we’re not going to be eligible for Medicaid.
So we may have long-term care insurance and maybe we have the VA benefits or maybe, just with our own money, we can make it that five years.
But if we have no power of attorney, or if it doesn’t give the power to transfer property or to sell stocks or whatever it may be, then that option may be taken away. If you have somebody that you trust, then sit down with a lawyer and do the power of attorney. That can be a very powerful thing.
- Make an advanced healthcare directive
I won’t say much about the advanced healthcare directive.
This allows us to avoid the tragedy.
Specifically, like the lady down in Florida went through for so long (Terri Schiavo) who lingered for a long time while people fought over whether she would want to live in her condition or whether she would want her family to “pull the plug.”
- Have at least a “simple” will
There’s a “simple” will. I put this in quotations marks because a lot of times, things aren’t quite as simple as most people think.
Lawyers that do divorces tell me that people come in all the time and say, “I have a very easy uncontested divorce.”
Well that may not always turn out to be so easy.
What I mean by a simple will is nothing fancy. It says, “Here’s where I want my money to go.”
If you’re married, it goes to your spouse, then to your kids.
If you’re not married. you might want it to go to this family member or that charity.
There are some more advanced items we like to see in wills where folks have done long term care planning but at a minimum, have the simple will.
Speaking of assets, one of the biggest and costliest mistakes has to do with transferring assets improperly…. We’ll cover that in our next article.
Next Step To Take
We will be continuing this series and will work our way through these five common mistakes. We hope you will enjoy reading these and more importantly that you will think about this and take action.
There are all different ways to take action and you have to decide what is best for you.
If you have any questions about long-term care, you can call our office at 1-205-879-2447.
Or, you can fill out our online contact form to do any of the following (assuming you or your family live in Alabama):
- Set up a phone conference or video conference
- Set up an in office consultation
- Request our free information packages on long term care planning, including Alabama Medicaid and the VA Pension.
Thanks for reading this and feel free to share this article and to put any comments you have below.