Prince’s Public Estate Drama – it all goes to his sister and five half-sisters

It is a pretty sad time for fans of music with the recent deaths of Chris Cornell, David Bowie, and Prince, among others.  These are, in my opinion, some of the greatest creative minds and musical masters the world will ever see.

Prince (Prince Rogers Nelson) was 57 years old when he died last year of an accidental drug overdose.  It appears that Prince had done no estate planning whatsoever.

The Inventory filed by the Personal Representative of Prince’s estate shows $25 Million in Real Estate alone.  Click here to see the actual inventory filed in the Probate Court.  It is likely that his combined real estate holdings will not be his most valuable assets compared to the value of his intellectual property, business interests, and catalog of 50 albums. These things will continue to generate significant revenue for many years. Much of his estate has not yet been valued, but it looks like it could be hundreds of millions of dollars.  The transfer of wealth for estates of this size is usually controlled through trusts and other legal directives.  From Court records to date, which are all available to the public, it appears that Prince did not have any such planning strategies in place.

With no trust in place, Prince’s estate will go through the probate process in the Minnesota court system.  The appointed representatives of the estate will be left to figure out what Prince owned, value each piece of property, pay the income and estate taxes, and distribute the remaining assets to the beneficiaries of the estate.

Prince has one sister and five half-sisters. A Minnesota Court has declared that his estate will be distributed to these six individuals.  While we can’t speculate about how Prince would have wanted his estate distributed, stories of Prince’s charitable nature during his lifetime suggest that he would have probably wanted to leave money to support charities. Stories of his private personal nature also suggest that he would have wanted to avoid such a public display and invasion of privacy.

In any event, if no will or trust turns up, Prince’s estate will be a media drama that unfolds in public.

What if Prince had not died from that drug overdose, but was instead incapacitated and unable to manage his health and financial affairs?  Who would have made decisions for him about his medical care, businesses, and finances? A court, in a public guardianship proceeding, would have had to appoint a guardian or conservator.  This person could have been a complete stranger to Prince.

Estate planning is not just for music icons worth hundreds of millions of dollars.  It is for everyone.  No matter the size of a person’s estate, a comprehensive estate plan will establish control, address incapacity, and direct the transfer assets how, to whom, and when you want.

The Costs of Dementia: For the Patient and the Family

A recent report from the Alzheimer’s Association states that one in nine Americans age 65 or older currently have Alzheimer’s. With the baby boomer generation aging and people living longer, that number may nearly triple by 2050. Alzheimer’s, of course, is just one cause of dementia—mini-strokes (TIAs) are also to blame—so the number of those with dementia may actually be higher.

Caring for someone with dementia is more expensive—and care is often needed longer—than for someone who does not have dementia. Because the cost of care in a facility is out of reach for many families, caregivers are often family members who risk their own financial security and health to care for a loved one.

In this post, we will explore these issues and steps families can take to alleviate some of these burdens.

Cost of Care for the Patient with Dementia—And How to Pay for It

As the disease progresses, so does the level of care the person requires—and so do the costs of that care. Options range from in-home care (starting at $46,332 per year) to adult daycare (starting at $17,676 per year) to assisted living facilities ($43,536 per year) to nursing homes ($82,128 per year for a semi-private room). These are the national average costs in 2016 as provided by Genworth in its most recent study. Costs have risen steadily over the past 13 years since Genworth began tracking them.

Care for a person with dementia can last years, and there are few outside resources to help pay for this kind of care. Health insurance does not cover assisted living or nursing home facilities, or help with activities of daily living (ADL), which include eating, bathing and dressing. Medicare covers some in-home health care and a limited number of days of skilled nursing home care, but not long-term care. Medicaid, which does cover long-term care, was designed for the indigent; the person’s assets must be spent down to almost nothing to qualify. VA benefits for Aid & Attendance will help pay for some care, including assisted living and nursing home facilities, for veterans and their spouses who qualify.

Those who have significant assets can pay as they go. Home equity and retirement savings can also be a source of funds. Long-term care insurance may also be an option, but many people wait until they are not eligible or the cost is prohibitive.

However, for the most part, families are not prepared to pay these extraordinary costs, especially if they go on for years. As a result, family members are often required to provide the care for as long as possible.

Financial Costs for the Family

Women routinely serve as caregivers for spouses, parents, in-laws and friends. While some men do serve as caregivers, women spend approximately 50% more time caregiving than men.

The financial impact on women caregivers is substantial. In another Genworth study, Beyond Dollars 2015, more than 60% of the women surveyed reported they pay for care with their own savings and retirement funds. These expenses include household expenses, personal items, transportation services, informal caregivers and long-term care facilities. Almost half report having to reduce their own quality of living in order to pay for the care.

In addition, absences, reduced hours and chronic tardiness can mean a significant reduction in a caregiver’s pay. 77% of those surveyed missed time from work in order to provide care for a loved one, with an average of seven hours missed per week. About one-third of caregivers provide 30 or more hours of care per week, and half of those estimate they lost around one-third of their income. More than half had to work fewer hours, felt their career was negatively affected and had to leave their job as the result of a long-term care situation.

Caregivers who lose income also lose retirement benefits and social security benefits. They may be sacrificing their children’s college funds and their own retirement. Other family members who contribute to the costs of care may also see their standard of living and savings reduced.

Emotional and Physical Costs to Caregivers

In addition to the financial costs, caregivers report increased stress, anxiety and depression. The Genworth study found that while a high percentage of caregivers have some positive feelings about providing care for their loved one, almost half also experienced depression, mood swings and resentment, and admitted the event negatively affected their personal health and well-being. About a third reported an extremely high level of stress and said their relationships with their family and spouse were affected. More than half did not feel qualified to provide physical care and worried about the lack of time for themselves and their families.

Providing care to someone with dementia increases the levels of distress and depression higher than caring for someone without dementia. People with dementia may wander, become aggressive and often no longer recognize family members, even those caring for them. Caregivers can become exhausted physically and emotionally, and the patient may simply become too much for them to handle, especially when the caregiver is an older person providing care for his/her ill spouse. This can lead to feelings of failure and guilt. In addition, these caregivers often have high blood pressure, an increased risk of developing hypertension, spend less time on preventative care and have a higher risk of developing coronary heart disease.

What can be done?

Planning is important. Challenges that caregivers face include finding relief from the emotional stress associated with providing care for a loved one, planning to cover the responsibilities that could jeopardize the caregiver’s job or career, and easing financial pressures that strain a family’s budget. Having options—additional caregivers, alternate sources of funds, respite care for the caregiver—can help relieve many of these stresses. In addition, there are a number of legal options to help families protect hard-earned assets from the rising costs of long term care, and to access funds to help pay for that care.

The best way to have those options when they are needed is to plan ahead, but most people don’t. According to the Genworth survey, the top reasons people fail to plan are they didn’t want to admit care was needed; the timing of the long-term care need was unforeseen or unexpected; they didn’t want to talk about it; they thought they had more time; and they hoped the issue would resolve itself.

Waiting too late to plan for the need for long-term care, especially for dementia, can throw a family into confusion about what Mom or Dad would want, what options are available, what resources can help pay for care and who is best-suited to help provide hands-on care, if needed. Having the courage to discuss the possibility of incapacity and/or dementia before it happens can go a long way toward being prepared should that time come.

Watch for early signs of dementia. The Alzheimer’s Association (www.alz.org) has prepared a list of signs and symptoms that can help individuals and family members recognize the beginnings of dementia. Early diagnosis provides the best opportunities for treatment, support and planning for the future. Some medications can slow the progress of the disease, and new discoveries are being made every year.

Take good care of the caregiver. Caregivers need support and time off to take care of themselves. Arrange for relief from outside caregivers or other family members. All will benefit from joining a caregiver support group to share questions and frustrations, and learn how other caregivers are coping. Caregivers need to determine what they need to maintain their stamina, energy and positive outlook. That may include regular exercise (a yoga class, golf, walk or run), a weekly Bible study, an outing with friends, or time to read or simply watch TV.

If the main caregiver currently works outside the home, they can inquire about resources that might be available. Depending on how long they expect to be caring for the person, they may be able to work on a flex time schedule or from home. Consider whether other family members can provide compensation to the one who will be the main caregiver.

Seek assistance. Find out what resources might be available. A local Elder Law attorney can prepare necessary legal documents, help maximize income, retirement savings and long-time care insurance, and apply for VA or Medicaid benefits. He or she will also be familiar with various living communities in the area and in-home care agencies.

Conclusion

Caring for a loved one with dementia is more demanding and more expensive for a longer time than caring for a loved one without dementia. It requires the entire family to come together to discuss and explore all options so that the burden of providing care is shared by all.

We help families who may need long term care by creating an asset protection plan that will provide peace of mind to all. If we can be of assistance, please don’t hesitate to call us toll free at 866-227-3994 click on the contact link on our website.

To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer’s particular circumstances.

Year End Estate Planning Tip #3 – Check Your Mental Disability Plan

With the end of the year fast approaching, now is the time to fine tune your estate plan before you get caught up in the chaos of the holiday season. One area of planning that many people overlook is making sure their mental disability plan is up to date.

Three Areas of Your Mental Disability Plan That Are Likely Out of Date
If your estate plan is more than a few years old, then your mental disability plan is likely out of date for the following reasons:

1. Are your health care directives compliant with HIPAA? While the federal Health Insurance Portability and Accountability Act (known as “HIPAA” for short) was enacted in 1996, the rules governing it were not effective until April 14, 2003. Thus, if your estate plan was created before then and you have not updated it since, then you will definitely need to sign new health care directives (Living Will) so that they are in compliance with the HIPAA rules. With that said, it’s possible that health care directives signed in later years lack HIPAA language, so check with your estate planning attorney just to make sure that your estate plan documents reference and take into consideration the HIPAA rules.

2. Is your Power of Attorney stale? How old is your Power of Attorney? Banks and other financial institutions are often wary of accepting Powers of Attorney that are more than a couple of years old. This means that if you become incapacitated, your agent could have to jump through hoops to get your stale Power of Attorney honored, if it can be done at all. This could cost your family valuable time and money. Aside from this, Pennsylvania has enacted new laws governing Powers of Attorney, which become effective on January 1, 2015. If you want to increase the likelihood that your Power of Attorney will work without any hitches if you lose your mental capacity, update and redo your Power of Attorney every few years so that it doesn’t end up becoming a stale and useless piece of paper.

3. Does your estate plan adequately address mental disability? A will is something that only becomes effective when you die. With today’s longer life expectancies come increased probabilities that you will be mentally incapacitated before you die. A fully funded Revocable Living Trust is the best way to provide adequately for mental incapacity, but some older trusts do not. If you signed your Revocable Living Trust more than 8 to 10 years ago and haven’t updated it since or have assets that are outside your Revocable Living Trust, then it may well lack modern and appropriate provisions for what to do with you and your property if you become mentally incapacitated. Have your estate plan checked to ensure that it will work effectively and efficiently if you lose your mental capacity. Otherwise you and your loved ones may end up in front of a judge who will have to sort out your financial matters – at horrendous cost.

What Should You Do?
Estate planning is about much more than having a plan for who gets your stuff after you die – it should also include having a plan for what happens in case you lose your mental capacity. If your plan is more than a few years old or does not include a fully funded Revocable Living Trust, then chances are it lacks a good mental disability plan. Now is the time to meet with an experienced estate planning attorney to ensure that you have a mental disability plan that will work the way you expect it to work if it’s ever needed.

Eight Reasons – NOT – to have an estate plan.

If this one is too long for you, by all means, skip directly to number 8!!

1. You enjoy paying taxes. Maybe you believe that giving 40+% of your life savings to the government is a good use of that money. Your family can probably live on the fraction of your money left over.

Most people have heard that the federal estate tax exemption is over $5 million ($5.34 in 2014 and $5.43 in 2015). So, if your estate is comfortably under that there will be no tax consequences, right? Pennsylvania has an inheritance tax that is separate from the federal estate tax (see #2 below for more on this)*. Also, if you have a appreciated assets or a retirement plan and your heirs cash it out, it could have disastrous capital gains and/or income tax consequences.

2. You believe that State representatives know how to plan your estate better than you do. You voted to elect these officials, so why not let them make laws that will distribute your estate.

In Pennsylvania, if you’re married with children and you die without your own estate plan, the government has decided how your estate will be distributed. So, let’s say your two kids are 3 years old and 1 years old, respectively. Under the law, the first $30,000 goes to your spouse. Then the balance is divided 50/50 between your spouse and your children. You want your minor children to get 50% of the balance of your estate immediately, right?

*The 50% that passes to your children will be subject to Pennsylvania Inheritance Tax. There will be no inheritance tax owed on the first $30,000 and 50% of the balance that goes to your spouse. Wouldn’t it be better if 100% of your estate was not subject to inheritance tax, which would give your spouse that much more money to take care of your children?

3. Your minor children will be in good hands with a state agency.   You don’t need to name a guardian for your children. The Department of Children and Youth Services will be fine.

Avoid this. If for no other reason, make an estate plan to name guardians for your children.

4. You don’t want to have any say in how your spouse and children use their inheritance, they can just have it and enjoy it.

Your spouse and children will enjoy their inheritance a lot more if you have a plan to preserve assets for them and protect those assets from creditors, predators, and the heirs themselves. With an estate plan, you can protect your assets from the bad things in the world and make sure they are available to your loved ones.

General Needs Trusts, Special Needs Trusts, Retirement Trusts, Generation Skipping Trusts, Asset Protection Planning, Charitable Planning, and Business Succession Planning can all be accomplished by putting a comprehensive estate plan in place.

5. You’ll just make all your accounts and real estate joint with your kids. Why should you have an estate plan when you can just do this?

Adding your children as joint owners of bank accounts and real estate can cause serious issues such as: gift tax consequences, capital gains tax issues, and subjecting all of your assets to your children’s creditors. This is also problematic with regard to Pennsylvania’s Inheritance Tax laws.

6. You made a will 20 years ago and just wrote in the changes you wanted to make.

Making any marks on your will can invalidate the will or make it inadmissible in whole or in part to probate. At the very least, it will complicate matters with the probate court and could lead to disharmony in the family.

Avoid probate altogether with a living trust. Probate is a very public affair. Anyone can get a copy of your will from the probate court. The probate process takes at least 12 months to complete, and can incur hefty legal fees.

Maintain privacy and family harmony by having a trust in place that passes your property outside of the probate court.

7. You don’t have a lot of money and own very few assets, so why bother?

Estate planning is not just for the rich. Estate planning is not just about death. Estate planning is as much about lifetime planning as it is about wealth transfer on death:

  • Incapacity/Disability Planning
  • Health Care Powers of Attorney
  • Durable General Powers of Attorney
  • Living Wills
  • HIPAA Authorizations
  • Guardian Designations

8. You don’t plan on dying anytime soon.  

I hear this one a lot. Here’s my counteroffer: Estate planning is not about dying; it’s an act of love. You make an estate plan because your loved ones need you to. Put a plan in place for your loved ones. You’ll feel good about doing it and they’ll be taken care of.

 

Estate Planning for Young Families

Many young families put off estate planning because they are young and healthy, or because they don’t think they can afford it. But even a healthy, young adult can be taken suddenly by an accident or illness. And while none of us expects to die while our family is young, planning for the possibility is prudent and responsible. Also, estate planning does not have to be expensive; a young family can start with the essential legal documents and term life insurance, then update and upgrade as their financial situation improves. A good estate plan for a young family will include the following:

Naming an Administrator
This person will be responsible for handling final financial affairs—locating and valuing assets, locating and paying bills, distributing assets, and hiring an attorney and other advisors. It should be someone who is trustworthy, willing and able to take on the responsibility.

Naming a Guardian for Minor Children
Deciding who will raise the children if something happens to both parents is often a difficult decision. But it is very important, because if the parents do not name a guardian, the court will have to appoint someone without knowing their wishes, the children or other family members.

Providing Instructions for Distribution of Assets
Most married couples want their assets to go to the surviving spouse if one of them dies. If both parents die and the children are young, they want their assets to be used to care for their children. Some assets will transfer automatically to the surviving spouse by beneficiary designations and how title is held. However, an estate plan is still needed in the event this spouse becomes disabled or dies, so that the assets can be used to provide for the children.

Naming Someone to Manage the Children’s Inheritance
Unless this in included in the estate plan, the court will appoint someone to oversee the children’s inheritance. This will likely be a friend of the judge and a stranger to the family. It will cost money (paid from the inheritance) and the children will receive their inheritances in equal shares when they reach legal age, usually age 18. Most parents prefer that their children inherit when they are older, and to keep the money in one “pot” so it can be used to provide for the children’s different needs. Establishing a trust for the children’s inheritance lets the parents accomplish these goals and select someone they know and trust to manage it.

Reviewing Insurance Needs
Income earned by one or both parents would need to be replaced, and someone may need to be hired to take over the responsibilities of a stay-at-home parent. Additional coverage may be needed to provide for the children until they are grown; even more if the parents want to pay for college.

Planning for Disability
There is the possibility that one or both parents could become disabled due to injury, illness or even a random act of violence. Both parents need medical powers of attorney that give someone legal authority to make health care decisions if they are unable to do so for themselves. (You would probably name your spouse to do this, but one or two others should be named in case your spouse is also unable to act.) HIPPA authorizations will give doctors permission to discuss your medical situation with others (parents, siblings and close friends). Disability income insurance should also be considered, because life insurance does not pay at disability.

How to Leave Assets to Minor Children

Every parent wants to make sure their children are provided for in the event something happens to them while the children are still minors. Grandparents, aunts, uncles and other relatives often want to leave some of their assets to young children, too. But good intentions and poor planning often have unintended results.

For example, many parents think if they name a guardian for their minor children in their wills and something happens to them, the named person will automatically be able to use the inheritance to take care of the children. But that’s not what happens. When the will is probated, the court will appoint a guardian to raise the child; usually this is the person named by the parents. But the court, not the guardian, will control the inheritance until the child reaches legal age (18 or 21). At that time, the child will receive the entire inheritance. Most parents would prefer that their children inherit at a later age, but with a simple will, you have no choice; once the child reaches the age of majority, the court must distribute the entire inheritance in one lump sum.

A court guardianship for a minor child is very similar to one for an incompetent adult. Things move slowly and can become very expensive. Every expense must be documented, audited and approved by the court, and an attorney will need to represent the child. All of these expenses are paid from the inheritance, and because the court must do its best to treat everyone equally under the law, it is difficult to make exceptions for each child’s unique needs.

Quite often children inherit money, real estate, stocks, CDs and other investments from grandparents and other relatives. If the child is still a minor when this person dies, the court will usually get involved, especially if the inheritance is significant. That’s because minor children can be on a title, but they cannot conduct business in their own names. So as soon as the owner’s signature is required to sell, refinance or transact other business, the court will have to get involved to protect the child’s interests.

Sometimes a custodial account is established for a minor child under the Uniform Transfer to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). These are usually established through a bank and a custodian is named to manage the funds. But if the amount is significant (say, $10,000 or more), court approval may be required. In any event, the child will still receive the full amount at legal age.

A better option is to set up a children’s trust in a will. This would let you name someone to manage the inheritance instead of the court. You can also decide when the children will inherit. But the trust cannot be funded until the will has been probated, and that can take precious time and could reduce the assets. If you become incapacitated, this trust does not go into effect…because your will cannot go into effect until after you die.

Another option is a revocable living trust, the preferred option for many parents and grandparents. The person(s) you select, not the court, will be able to manage the inheritance for your minor children or grandchildren until they reach the age(s) you want them to inherit—even if you become incapacitated. Each child’s needs and circumstances can be accommodated, just as you would do. And assets that remain in the trust are protected from the courts, irresponsible spending and creditors (even divorce proceedings).

Long-Term Care Planning, Part 2 – Your Funding Options

The first part of planning for long-term care is realizing that, a) most of us will need this kind of care for at least some time before we die and b) the cost of this care can be financially devastating for a family if it is not planned for in advance. This was covered in Long-Term Care Planning, Part 1.

The next part is determining how you will pay for long-term care that may be needed for you, your spouse or another family member.

The Key Takeaways
• Long-term care is not covered by health insurance, disability insurance or Medicare.
• You have limited options when considering how these expenses could be paid.
• The best way to plan for the possible expense of long-term care is to accept it as a central requirement in your overall financial planning and seek professional assistance.

Who Pays for Long-Term Care?
Many people are surprised to learn that long-term care is not covered by health insurance, disability income insurance or Medicare. Health insurance plans cover nursing home expenses only for a short period of time while you are recovering from an illness or injury. Disability income insurance will replace part of your income if you are not able to work after a specified time, but does not pay for long-term care. Medicare, which covers most people over age 65, provides limited coverage for skilled care for up to 100 days immediately following hospitalization. After that, you’re on your own.

How Will You Pay for Long-Term Care if Needed?
1. Use your own assets. This is called self-insuring. If you need long-term care, you will pay for it from your own assets. If you don’t need the care, then you will not have spent money on insurance premiums. You can set aside a certain amount of your assets for this specific purpose or have the expenses paid from a general investment fund. Your financial advisor will be able to help you make that decision, determine how much you might need, and help you attain your goal through investments.

2. Buy long-term care insurance. This has traditionally been a good option, especially if you have assets and income you want to protect, you want to avoid being a financial burden on others, and you want to have some choice in the care you receive. Most policies give you the option of receiving care in your own home or in a private-pay facility. As with any insurance, the premiums are lower when you are younger and in good health; if you wait too long, the cost could be prohibitive and you might not qualify. In recent years, the premiums have gone up on these policies because the insurance companies under-estimated the actual costs. Your insurance advisor will be able to help you evaluate current policies and determine if one is right for you.

3. Purchase life insurance and annuities with long-term care benefits. Some life insurance policies have accelerated death benefits that will pay benefits if the insured has a care issue, as do some annuity products. The premiums for these will be higher, but they may be worth exploring. Your insurance advisor will be able to help you evaluate these options.

4. Qualify for Medicaid. Medicaid pays the bills for a large number of people in nursing homes today. But because the program is designed to provide services for those who cannot support themselves (children, the disabled, the poor), you will have to “spend down” your assets and be practically penniless in order to qualify for benefits. Your spouse will also be limited to the amount of assets and income he or she can have, and you will only be able to receive care from a facility that accepts Medicaid. (Most people would prefer to receive care at home or in a private-pay facility.)

If you have minimal assets, this may be an option for you. However, before you do anything, speak with a local elder law attorney who has experience with Medicaid planning. Medicaid, while a federal program, is administered by the states, so the rules vary from state to state. An innocent error could disqualify you from receiving benefits for many months.

Explore a Medicaid Trust. When properly prepared, these irrevocable trusts can help some people qualify for Medicaid without impoverishing the well spouse or spending the children’s inheritance. Five years must pass between the time assets are transferred to the trust and when the person is deemed eligible for Medicaid. This is known as the “look-back period.” Long-term care insurance is often used to cover the look-back period if care is needed before qualifying for Medicaid. Assistance from a local elder law attorney who has extensive experience with these trusts is absolutely essential.

What You Need to Know: The benefit of planning for the possible costs of long-term care is the peace of mind that comes from knowing that this care can be provided if needed without destroying the financial well-being of the entire family.

Actions to Consider
• Find out the costs for long-term care in your area. Your professional advisors (financial, attorney, insurance) will be able to give you some parameters.
• Talk with your spouse about the kind of long-term care you would each like to receive if that time comes. Do you want to stay in your home? Do you want to be in an assisted-living facility together for as long as possible?
• Talk with your advisors (financial, attorney, insurance) about your options and make an educated decision that is right for you.
• Let other family members know about your decisions and your plans. This will let them know your wishes, what they will need to do, and whom to contact. It will also give them peace of mind.

Long-Term Care Planning, Part 1 – A Central Requirement

Health care has been the topic of discussion lately, but the greatest threat to your financial health is long-term care. This is the kind of care you need if you are not able to perform normal daily activities (such as eating, dressing, bathing and toileting) without help, and it is expected that you will need this help for an extended period of time, often for the rest of your life.

Long-term care is often needed due to aging, chronic illness or injury, and with people living longer, most of us will need it for at least some time before we die. But it is not just for the elderly—a good number of younger, working-age adults are currently receiving long-term care due to accident, illness or injury.

The Key Takeaways
• The cost of long-term care is the greatest threat to your financial health.
• Most of us will need long-term care for at least some time before we die.
• It is better to assume you will need long-term care and plan for it than to just hope it doesn’t happen to you or a family member.

The Expense of Long-Term Care
Long-term care can be provided in your home, in an assisted living facility or in a nursing home. All can become very expensive over time.

For example, home health care can easily run over $20,000 per year—that’s at $16 per hour for just 25 hours per week. Depending on the skill required, number of hours needed and where you live, it can cost considerably more.

Assisted living facilities can cost more than $25,000 per year. Here, everything is a la carte—the more services you need, the higher the cost. Nursing home facilities, with round-the-clock care, are $50,000 or more a year.

Costs for long-term care are hard to estimate. The average stay in a nursing home is three years; patients with Alzheimer’s usually need care longer, often in specialized facilities. Again, the actual costs will depend on the kind of care you need, how long you require it and where you live. Expect these costs to increase as the cost of medical care, in general, continues to rise.

What You Need to Know: Long-term care expenses are not covered by health insurance, disability income insurance or Medicare. If you do not plan for these costs, and you or another family member requires long-term care, the results can be financially devastating for your family.

Actions to Consider
• Find out what costs are for long-term care in your area. Your financial and/or insurance advisor will be able to give you some parameters. You can also ask friends and neighbors; you probably know someone who has a family member receiving care at home or in a facility.
• Have an honest discussion with your spouse (and possibly other family members) about these costs and your desires about long-term care, should you need it. Most people want to stay in their homes. Find out what it would cost to make that happen—renovations to your home, home health care, etc.
• The next step is to start planning how to handle these costs, which will be addressed in Part 2.

If a relative or family friend cares for your children while you’re at work, out of town, or otherwise unavailable, then you should sign a Medical Consent Authorization.

I recently worked on some estate planning with a couple that had a two year old daughter.  Towards the end of the final meeting when we all gathered together to sign the documents we had prepared, they posed a question to me.  We are going out of town for four days for a friend’s wedding. Our daughter is staying with one of our parents and she has a doctor’s appointment one of those days.  Do we need to do anything for that?

Yes, you need a Medical Consent Authorization.

I now include this document in every estate plan where the client(s) have minor children.

The Pennsylvania Medical Consent Act generally allows a parent (or legal guardian) to make a Medical Consent to give a relative or family friend the power to consent to medical, surgical, dental, developmental, mental health, or other treatment for the child in the parent or guardian’s absence.  There are specific state requirements that must be met in order for a Medical Consent to be valid.

This form, when properly prepared and executed will be honored by all physicians, nurses, school nurses, mental health professionals, dentists, other health care professionals, hospitals, medical facilities, mental health facilities, and insurance providers.

These documents can remain in effect until otherwise revoked in writing, or they can be limited to a certain period of time.

So, if a relative or family friend watches your kids while you’re at work, out of town, or otherwise unavailable, get a Medical Consent prepared.

Please feel free to Contact Me to discuss whether a Medical Consent is something that might help you.

Making a will to appoint a Guardian for your children

My wife and I had our first child 4 years ago. A few months before she was born, I think we spent about 3 hours in babies r us, and probably 10 or more hours online and in books studying up on the safest carseat for her. If you’re a parent, then I assume you probably had a similar experience.  We all want to protect our kids and make sure they are as safe as possible.

Here’s the part no one likes to think about. What if something happens to us? Who will be there for the kids? Or, maybe you already thought about it and went and got some life insurance. That’s a step in the right direction, but there’s more.

Under the unpleasant circumstances of both natural parents deaths, there are two answers to the question of who will take care of the kids:

(1) your kids will be cared for by the Guardian(s) you appoint in your will, or

(2) the court will appoint a Guardian if you have not named one.

Regardless of the size of your estate, parents of minor children (under the age of 18) should have wills naming a Guardian or Guardians for their children.

In Pennsylvania, there are two types of Guardians for minors: (1) Guardian of the Person, and (2) Guardian of the Estate. Those two can be the same person serving as Guardian of the Person and Estate of the minor child.

The Guardian of the Person is the person that will make general decisions related to the care of the child. The Guardian of the Estate handles the money forming the Guardianship Estate for the child. Some people appoint the same person for both positions.

In the event of the deaths of both of the natural parents, failure to have appointed a Guardian by will makes a court proceeding necessary to determine who the Guardian of your children will be.

Family harmony and the best interests of the minor children are best preserved by appointing a Guardian or Guardians in your will as opposed to subjecting them to court proceedings.

Additional planning can provide even greater guidance and control over the management of money you leave for minor children by including a trust for the benefit of a minor child or children in your will.

Such a trust is generally known as a testamentary trust because it is created by your will at the time of your death. In such a situation, the trust is only funded upon the death of the individual who created it.

For more information on trusts for minors, I’ll be writing a new post soon titled “trusts for minor children.”