Thanksgiving Food For Thought: Talking To Your Parents and Grandparents about Estate Planning

Tomorrow, families across the United States will gather to celebrate Thanksgiving.  Both immediate and extended families will be spending a significant portion of the next few days with each other and inevitably, interesting discussions will emerge.  One discussion point that will be less likely to emerge than most is about estate planning, specifically the plans parents and grandparents have in place. But while talking about this topic may not be the happiest way to spend your holiday, having a conversation with your older relatives is essential to protecting them, their assets and your own planning.

There are several reasons why a child (or grandchild) should be concerned with their parents’ and grandparents’ estate plans.  First, knowing what your senior relatives plans are will allow for a smoother transition and administration of their assets if they die, become severely disabled or incapacitated.  Second, with nearly 75% of all adults over 65 having some form of a long-term care event during their lifetime, children and grandchildren may have to coordinate the payment of their elder relatives long-term care expenses.   Third, in the event of death, severe disability or incapacity, children and grandchildren may be asked to serve as fiduciaries for senior family members as executors of their estates, trustees of trusts or agents under power of attorneys and health care proxies.  Finally, children and grandchildren may be named as beneficiaries of their parents’ and grandparents’ estates.  An inheritance can raise issues for the inheriting children and grandchildren including tax and creditor related problems.

Understanding why you should speak to your parents and grandparents about estate planning is significantly easier than actually speaking to them about the subject.  Each family member has their own temperament when it comes to discussing financial and other personal matters, so an awareness of how a relative will react is key to avoiding unnecessary conflict.  If they are open to having a discussion about estate planning, explain that you are coming from a place of concern.  Inquire about what they have and have not done in terms of their planning.

If, like many parents and grandparents, they don’t want to discuss this issue, there are other ways to ensure that they are protected.  If they have already worked with an estate planner, encourage them to check in with their advisor to ensure their plan is up to date.  If they have not prepared an estate plan, offer them the names of attorneys, financial planners and accountants that you work with and with whom you trust.   While some older relatives may not want to openly discuss their planning with their younger relatives, many will appreciate the opportunity to speak with a professional with no personal connection to them.

Once you are able to begin the discussion, by yourself or through a professional, there are certain subjects that should be discussed.  Among them:

1)   Nature and location of the estate planning documents;

2)   What assets do they own and where are they located;

3)   Who are their professional advisors;

4)   How are they planning to pay for any long-term care expenses;

5)   Who are the beneficiaries of their estate; and

6)   Who are the fiduciaries that will be in charge of their affairs if they die, become severely disabled or incapacitated.

 Having an estate planning conversation with your parents and grandparents will be difficult.  Even if they are completely transparent and willing to talk, the subject matter can be difficult to think about.  Nevertheless, as a loving relative, it is important that your relatives are protected and that their ultimate wishes as to their estates and well-being are known and able to be fulfilled in a timely and proper manner.

Please contact info@levyestatelaw.com for more information about multi-generation estate planning.

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Planning for Long Term Care Needs

Science and medicine have demonstrably changed how long we live and quality of our lives over time.  In the 1910s, the average life expectancy for Americans was 50.1 years.  Today, the average life expectancy is 77.9 years, an increase of over 50%.  With the longer life expectancies and growing populations, new problems have also arisen.

Among those living past 65, 70% of them will need some form of long-term care.  Long-term care is a broad class of services, which include nursing homes, assisted living facilities, home health care, adult day services and other services provided to older adults. Most of these services are not completely covered by traditional health insurance or even Medicare.  Therefore, it is important to have other means to pay for these services planned for before the need arises.

The most basic method of payment is self-payment.  Unfortunately, the cost of paying for long-term care services out of pocket is prohibitive to all but the wealthiest individuals.  In some instances, an individual can create a long-term care savings account or trust and contribute to it throughout their lifetime to ensure that their long-term care is paid for.

A preferred method of payment is the use of a long-term care insurance plan. These policies cover the long-term care expenses that health insurance, Medicare and Medicaid do not cover.  There are many types of long-term care insurance policies with varying premiums, benefits and periods of time that a policy holder must wait before the benefits will be paid.  Additionally, some life insurance policies are structured to allow the owner to accelerate the death benefit to be used to pay long-term care expenses.

In order to take advantage of either the self-pay or long-term care insurance options, it is essential to plan early on in life.  For some, their health and/or age make these options unavailable or cost prohibitive.  In other situations, a sudden change to a person’s health can trigger an unexpected long-term care need.  In these situations, an individual can pay for their expenses by qualifying for Medicaid.

Medicaid is only available in limited circumstances and it requires careful planning to ensure that individual qualifies.  There are strict limitations on the assets, which a person on Medicaid can own and how much income they may receive.  In New York, a Medicaid applicant may only own $13,800 in non-exempt assets and may only receive $767 in income per month.  The asset limits do not include a person’s home, which is considered an exempt asset.

An individual may transfer their assets out of their name to qualify for Medicaid.  When the transfer is made and how much is transferred will affect when the individual will qualify for benefits.  In New Yorks, transfers made within sixty months of a Medicaid application will be considered an available resource and will delay the individual’s qualification for Medicaid.  The length of this “penalty period” will be determined based on the value of the assets transferred divided by the average cost of private care in the applicant’s community.  During the penalty period, the applicant must self-pay for their care.

As with estate planning, long-term care planning requires dealing with a difficult topic that many would rather avoid.  Avoiding the issue does not solve the problem and as our life expectancies continue to increase, even more people will have a need for long-term care.  Planning early in life can ensure that your care will be paid for and that your other assets will be preserved.

Please contact info@levyestatelaw.com for more information about long-term care planning.