Why All Adults Need an Estate, Long-Term-Care Plan

On this episode of The Long View, Cameron Huddleston, journalist and author of Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances, discusses long-term care, estate planning, and her experience with a mother with Alzheimer’s.

Here are a few excerpts from Huddleston’s conversation with Morningstar’s Christine Benz and Jeff Ptak:

Key Elements of Estate Planning That Every Older Adult Should Have

Ptak: Let’s shift and talk about estate planning. What are the key elements of an estate plan that every older adult should have?

Huddleston: And I’m glad that you said every older adult, because a lot of people think estate planning is just something that wealthy people do. But all adults need a will or a trust, something that spells out who gets what when you die. Because if you die without a will, state law is going to determine who gets your assets. And so, if you have any desire to determine who gets your things when you die, you need to put it in writing. Otherwise, your family members get into fighting over who gets what. And people will fight over some really small things. So, you need a will or a trust. You need a power of attorney. The best is a general, durable power of attorney, someone who can make financial decisions for you if you can’t.

So, just for example, if mom has Alzheimer’s disease and you need to make sure her bills are paid, you cannot sign checks for her legally, you can’t access her bank account unless you have been named her power of attorney and you’ve provided that document to the bank to show that you are indeed power of attorney. You need a healthcare power of attorney. It’s also called a healthcare surrogate or healthcare proxy, someone who can make medical decisions for you if you can’t. You also need an advanced directive. This is also called a living will, something that spells out what sort of end-of-life medical care you do or do not want so that, again, your family knows what your wishes are so they don’t end up in court fighting over whether to keep you on life support. All adults need these documents.

How Does Communication Play a Role in Estate Planning?

Benz: Let’s talk about the communication that it seems like should accompany those documents. I think in a lot of families the parents, or the older adults, go through the process of creating the estate planning documents. Then they just go into a drawer and don’t get discussed with any other family members or loved ones who might be involved with eventual decisions. Can you talk about that component of it?

Huddleston: Your will and these other documents, it’s not going to do any good to have them if no one knows where to find them. And like you said, this is what often happens. They go into a drawer. They go into a home safe or a filing cabinet. And the kids don’t even know where to find these things. And if they don’t know that they exist, then again, you could end up in court fighting over who gets what after mom and dad died because you didn’t even know there was a will in existence. No one knows that they’ve been named power of attorney. So, they go through the court process to be named conservator, and it creates a lot of headaches. It is really important to talk to your parents to find out if they have these estate planning documents.

It’s also important when you try to have these conversations, not to ask your parents something along the lines of, “Hey, do you have a will? I need to know what I’m getting when you’re gone.” You don’t want to look like you’re being greedy, and that’s not the point of having these conversations. You’re not trying to find out what you’re getting. That’s up to your parents to decide whether they want to share that information with you. You just want to know do they have these documents and where are they located. If you’re an older adult, you need to be letting your children, your family members know where these documents are located, how they can be accessed. It’s so important for everyone to know where these documents are when emergencies arise.

How to Discuss Attitudes Around Planning Long-Term Care

Ptak: It seems important for older adults to talk through their own attitudes toward long-term care should they end up needing it and perhaps even formulate some kind of a long-term-care plan. What would that entail if they were to do that?

Huddleston: Well, for starters, you need to figure out how you’re going to pay for long-term care. And I know a lot of us would like to think I’m never going to need it. I am going to live to the ripe old age of 95, and I’m never going to have to count on anyone for support because I’m in great health. Well, I thought my mom was in pretty good health, but she ended up being diagnosed with Alzheimer’s disease at the age of 65, which is pretty young. She did not have long-term-care insurance. I did have that conversation with her before she was diagnosed with Alzheimer’s disease. And she did attempt to get a long-term-care insurance policy, but because of that tumor that she had behind her ear, she was considered too high risk.

Long-term-care insurance is the one type of insurance that will cover the cost of long-term care. Medicare does not cover the cost of long-term care. Medicaid can cover the cost of long-term care, but you have to qualify, and that means having very limited income and assets. There are some veterans’ benefits that can help cover the cost of long-term care. And what long-term care is, is assistance with the activities of daily living, bathing, dressing, eating, getting in and out of bed, going to the bathroom. This sort of care can be provided in your home. It can be provided in an assisted living facility, a memory care facility. It can be provided with adult daycare. It can be provided in a nursing home, and it is incredibly expensive.

The median cost of one month of care in an assisted living facility is around $4,500, and that’s just the median cost. If you are on the West Coast or the East Coast and a place where there’s a high cost of living, it’s going to cost a lot more. An individual room in a skilled nursing facility costs double that. My mother was in a memory care facility for eight years. Before that, even while she was living with me, we still hired caregivers to come into the home and help care for her while I was working, taking care of my kids. Over the course of that period, we spent more than $500,000 on her care. And so, you have to make a plan to cover these costs. Of course, if you have retirement savings, you can dip into those savings. But if you are, let’s say, the breadwinner of your family, and you’re the only one who’s been setting aside money for retirement, and you have a spouse who’s counting on those retirement savings too, if you’re using all that money to cover your cost of long-term care, your spouse is going to be left without any income for her or for him in retirement. And so, there’s long-term-care insurance.

There are life insurance policies with long-term-care benefits. You can potentially rely on a reverse mortgage. And like I mentioned, if you don’t have the money to pay for long-term care and you have limited income and assets, then Medicaid can help cover the cost of long-term care, but it’s difficult to qualify and it’s quite the process to apply for Medicaid. Oftentimes, it really helps to have an attorney who specializes in Medicaid to help you get Medicaid benefits. But it’s so important to plan for this sort of care because more than half of adults will need long-term care at some point.

When Should You Plan Long-Term Care?

Benz: What’s the right age to plan for that care? It sounds like your mom, even though her diagnosis came fairly early in her life, she had that preexisting condition that ruled out long-term care insurance. When should people start formulating that plan?

Huddleston: Honestly, you should be thinking about this as soon as you are in the workforce and making sure you’re saving enough for retirement, even extra, to pay for long-term care. You don’t need to be thinking about applying for long-term-care insurance, though, until you are a little bit older. In your early 50s is a good time to think about applying for long-term-care insurance if you want to go that route. You still need to be healthy to get long-term-care insurance coverage. You’re not going to get it if you’ve already been diagnosed with dementia, Parkinson’s, anything like that that’s going to require long-term care.

If you are in your early 60s and still in good health, you still might qualify for a long-term-care insurance policy. You’re more likely to qualify for a permanent life insurance policy with long-term-care benefits. Those are a little bit easier to qualify for. But they tend to be more expensive and their long-term-care benefits are not as robust as they are with traditional long-term-care insurance. But in your late 40s, early 50s, that’s really a good time to start thinking about it. And it’s a good time to start having conversations, too, with your adult children. Certainly, if you’re in your 60s, it’s a good time to have conversations with your adult children about your care plans and whether you’re expecting them to pitch in and help, because it’s going to impact your children financially if they have to help care for you. Caregiving can be a full-time job. And if they’re going to have to step away from their jobs to care for you, of course, that’s going to impact them financially.

And I’ll tell you, you don’t want to do that to anyone, you really don’t. That’s why you need to have a plan. You don’t want to force your children to care for you. I’ve told my kids, I don’t expect you to help care for me. I do want you, if I do need long-term care, to at least be there to make sure the bills are getting paid, to manage the financial side of things if my husband is not still around. But I don’t want my kids to have to jeopardize their own finances to care for me. And so, these are things that you need to be thinking about sooner rather than later.