If you are reading this and you are a healthy vigorous senior, but have not done your estate planning, Here’s Your Sign! Here is another opportunity to get it right. In this blog post we are going to talk about planning for incapacity before you die. We refer to this as Bridge of Life planning. This type of planning is critical for your future financial well being and the future livelihood of your family. It’s important, yet, it is the most overlooked. It’s true that most people plan for the distribution of their assets when they die. However, no plan is ever made for how those same assets could be used in the event of their own incapacity before death.
I realize that different people may be reading this at different stages of their life. As mentioned above, some who are reading this may be healthy and vigorous seniors. They just want to get their ducks in a row. On the other hand, some are further down life’s journey and have suffered some health challenges. After overcoming those challenges they are still very capable of doing any type of planning that is important to their family or estate. Yet others may have diminished capacity but still have sufficient capacity to understand and sign estate planning documents. If you’re in this situation, you may be relying heavily upon your kids for assistance.
Be Prepared for the “Whatevers”
If any of the above scenarios describe you, just know that it is time that you start the Estate Planning process. In this blog post we are talking about Bridge of Life planning. This is planning that involves what you want to happen during the remainder of your life, given the circumstances and resources that are available to you. Most people do not even think about this type of planning. To the contrary, they just let “whatever” happen in their lives, which often does not produce a good outcome.
If you are concerned about the numerous “whatevers” that could happen, you are wise to not only be concerned, but to be proactive. According to recent estimates, almost 10,000 people reach age 65 everyday in the U.S. Less than 70% of these individuals have done any type of planning at all. Given the rates of progression of Alzheimer’s and other catastrophic diseases this is staggering. According to the Alzheimer’s Association, someone in the U.S. develops Alzheimer’s every 66 seconds. On top of that, 1 in 3 Seniors die from Alzheimer’s or another dementia.
Alzheimer’s is a disease that wreaks havoc on families. Our deepest hope is that your family has not been affected by it. However, preparation is key. Most only plan for asset distribution at death. Proper plans for asset management during incapacitated times are never made. It is critical to plan for proper use of assets and the management thereof during our lifetime AND during the period of our incapacity.
Bridge of Life Planning
Bridge of Life Planning is our brand of pre-planning. This involves planning your estate BEFORE something bad happens. Bridge of Life Planning is a special type of pre-planning. As mentioned above, most estate planning focuses only on what happens to your assets AFTER something bad happens (meaning after you die).
Bridge of Life Planning focuses on planning your estate BEFORE something bad happens. YOU make the important decisions about what happens to your home, property, and your LIFE before you die or are incapacitated.
Here are the 3 Primary Pillars in a Bridge of Life Plan:
You know what you want now. You are probably living at home and may want to live there for the rest of your life. But what do you want if you start to decline physically or cognitively? Do you want to remain at home with the assistance of your spouse or adult children? Would you want to move in with your children or have them move in with you? Do you want to hire professional caregivers to provide care in your home or do you want to move to an Assisted Living Facility? Have you toured any Assisted Living Facilities or Independent Living Facilities in your area? What does all of this cost?
As you can see, there are a lot of factors that are important to consider. It’s important to think about what you want to happen should you have future health challenges that require you to change where or how you live. Even if you start to decline before you die, you still want to have the best quality of life possible. To make sure that happens, its important to think about all of these things in advance and map out a plan.
It’s also a good idea to discuss all of your preferences with your Family. When you get your plan in place, have a Family Estate Planning Meeting where you can discuss what you want with your Family. Make sure they understand and buy into your Plans for your future care.
It goes without saying that long term care is expensive! Whether you or your declining Loved One is receiving care at home or in a facility, it requires money to make it happen. If you are able to evaluate and review your financial plan as outline below, you should be the one to do so. If you are reading this as one of the adult children who are acting on behalf of a declining parent, it is important to plan quickly but carefully to help maximize and protect your parent’s asset. Some of the important steps for this planning pillar are:
One topic of your families Estate Planning meeting should be a review of your assets. Your family needs to know both where your assets are and how they are invested. Very often, the kids don’t have a clue about parent’s finances until after something bad happens. Children often must scurry around to find out what their parent’s have, where it is invested, and whether they can get to it to help pay their parent’s medical expenses. If you can’t trust your kids with this information, find a professional trust officer that can help when needed.
Meet with a Financial Adviser
Have you invested your assets appropriately? You should discuss how assets are invested with your financial adviser. If you get to the point where you need extra help at home, discuss whether your financial assets could be invested. This can generate a little extra income to help pay additional costs.
Are assets accessible?
We have seen situations where an individual’s health declined suddenly and the adult children needed access to assets to help pay for their medical expenses. Assets may be invested in fixed investments, IRA’s, 401(k) or other investments that take substantial amounts of time to access. This may cause financial difficulty for the family. Make sure that the person you appoint as your attorney is in fact under a Power of Attorney. Be certain he/she has quick access to your financial assets in a time of need.
Legal Planning (aka Estate Planning)
Asset Distribution & Management Documents
Irrevocable Trust Can be a very good estate planning tool in specific situations. For example, say a family has a large fixed asset, such as a farm, that they want to keep in the family. An Irrevocable Trust may be a useful option to consider. That same family may run through their cash quickly if they had only a modest amount of cash and needed to go to a nursing home in the future. Medicaid may deny an application if they consider a person to be “over-resourced”. Properties (i.e. farms) are fixed assets that can’t be spent.
That farm would not be considered as an available asset for Medicaid calculation purposes if it had been placed in a specific type of Irrevocable Trust more than 5 years ago. Proper Estate Planning could have saved the farm.
Revocable Living Trust
A Revocable Living Trust is a great alternative to a Last Will and Testament for many individuals. A properly created and properly funded trust protects the assets in the trust from probate at the death of the Trustors (that’s You). The Assets in the trust will be available to you during your lifetime. At the time of your death, your assets will then be distributed according to the Trust.
You are the Trustee of your trust while you are alive. At your death, your successor trustee (maybe your kids) take over and administer the trust as you have directed. The big benefit to your beneficiaries is that they do not have to go through probate at your death. There are other benefits. One benefit is the appointment of your Incapacity Trustee. This person then takes charge of managing the Trust.
Pour Over Will
A Pour Over Will is a Last Will and Testament with some special features. There is a primary distinguishing feature between this type of will and a “regular” will. A pour over will, “pours over” any assets that you have in your name at your death to your Revocable Living Trust. This is the good news.
The bad news is that anything that you have not funded to your Revocable Living Trust goes through probate at your death. This happens even though you have this pour over will. The lesson learned is to try to title all assets over to your Revocable Living Trust during your lifetime. This way, you do not have to rely on this pour over will to do it’s work of “pouring-over” what you forgot to pour yourself!
Property Power of Attorney
A Property Power of Attorney is one of the most important documents that a person can have. However, the person must have legal capacity to sign it. I can’t tell you the number of times that a family has come in with Mom or Dad who obviously have Alzheimer’s and obviously are not able to understand what they want or would be signing. It is often too late for a person in this situation.
A Court Ordered Guardianship may be required if an individual is incapacitated. Without it, children may not legally be able to manag personal or business affairs. Most Judges are very nice people – however, if there is a way to stay out of Court, that’s usually a good move!
A way that helps stay out of Court during a period of incapacity is having a good Property Power of Attorney in your arsenal. Property Power of Attorney makes two things clear. (1) WHAT you want to happen with your assets during a period of incapacity. (2) WHO you want to manage assets for you. You can’t just “tell them what you want” and expect that to work. Unless you have appointed the person that you would want to act on your behalf as your agent under a power of attorney, they typically have no legal authority to act.
Health Care Documents
Health Care Power of Attorney
A Health Care Power of Attorney is another critical estate planning document that is often overlooked. This document allows you to appoint an agent to make healthcare decisions for your during a period of incapacity. Before we die, many people become incapacitated. Unless you have named the person you want to make health care decisions for you, the result can be a nightmare!
Without such a directive, doctors and other medical professionals won’t know who you would want to make healthcare decisions for you. What if you have two children and one says, “Do the medical procedure!” But, then the other says, “Don’t do the medical procedure”. What is the doctor to do?
Thankfully, medical professionals have their own guidelines as to how to act in certain circumstances. But, those guidelines have to do with them, not you. Without a proper Health Care Power of Attorney in place, they will not know WHAT you wanted or WHO you want to act on your behalf.
Several years ago, Congress enacted HIPAA (Health Insurance Portability and Accountability Act of 1996). Although this is a big act, the part that concerns us here is the privacy portions that serve to protect your confidential medical information. Many laws “mean well”. These laws can often grow to the point where they “get out of hand”. This appears to be what has happened with HIPAA.
The person(s) that you would want acting on your behalf must have a signed HIPAA Authorization in their possession. Otherwise, the hospital or medical professionals that you are dealing with may not give out any of your health related information to them. Including even your room number.
It is important to have a properly drafted HIPAA Authorization as part of your portfolio of Health Care documents. When needed, the person(s) you trust will be able to access the medical information they need to make appropriate health care decisions on your behalf.
Private Living Will
A Private Living Will is often considered the “pull the plug” document. While not exactly that, in our state it is a legal document that authorizes the attending physician to withhold or withdraw medical treatment that only prolongs the process of dying.
This obviously concerns your life and death. Therefore it is critical to have in writing what you want – and what you don’t want. Don’t leave this important decision to chance or push it off on your family. It is important to let them know how you feel. Give them (in advance) the assurance that the decision that they made is the one that you wanted.
Asset Protection Planning
Sometimes, a person becomes incapacitated and nursing home care becomes necessary. We refer to this next phase in the process as Asset Protection Planning. At our firm, if you have already done Bridge of Life Planning (the first phase) as described above, we simply “flip the switch” and shift the planning process over to Asset Protection Planning.
Asset Protection Planning focuses on 2 things. (1) Preserving as many assets as possible for the incapacitated person, the at-home spouse, and the family; and (2) Getting the incapacitated individual qualified for Medicaid as quickly as possible to help pay for their nursing home care.
For more information, read our Asset Protection Planning article.
When you contact our office, you can expect the following:
Brief Phone Call
We will have a brief phone conversation with you to make a quick preliminary determination of whether we can help. There are some situations where we cannot do anything to help. Likewise, there are some that are just not appropriate for this type of planning. If this is the case, we will tell you and it will have cost you nothing to find out.
Fill Out Questionnaire
If it looks as if we can help, we will send you an Information Questionnaire. You send it back to us after filling it out. The questions we ask allow us to collect necessary information in the Bridge of Life Planning Process.
Schedule Initial Consultation
Schedule an initial office meeting to get a little more information. Did we mention that this is a process? The purpose of this meeting is to allow us to discuss the planning process with you in more detail. We will collect the information necessary to craft your personalized Bridge of Life Plan.
Document Review & Signing Meeting
This is the meeting you were waiting for. From reading above, it seems as if takes forever to get here. Really though, it only takes about 2 weeks from first phone call to this point. This is the meeting where we present your Bridge of Life Planning Documents and review them with you. We then sign, witness and notarize the documents. You will be able to take the originals home with you when you leave our office.
Free Planning Checklist
Click on this link to download a Bridge of Life Planning Checklist.
Haven’t done your estate planning? Have only basic planning and feel that it’s time to upgrade to a Bridge of Life Plan? Just call our office at (501) 843-9014. We will set a time for a free initial consultation.
DISCLAIMER: The above overview was a greatly oversimplified and generalized 30,000 foot view of the Bridge of Life Planning Process. Legal opinions have neither been given nor intended in this article. Our purpose here was to give you a broad overview. With it, you can know what type of planning is generally possible. We hope that you will be better able to separate fact from fiction when you begin your plan. Please seek the assistance of an Elder Law Attorney or other qualified professional when you begin your estate planning process. You will be glad you did.