No one likes to think about the possibility of their own disability or the disability of a loved one. However, as the statistics below demonstrate, we should all plan for at least a temporary disability. This article examines the eye-opening statistics surrounding disability and some of the common disability planning options. Disability planning is one area where we can give each and every person and family we work with great comfort in knowing that, if they or a loved one becomes disabled, they will be prepared.
Most Individuals Will Face At Least a Temporary Disability
Study after study confirms that nearly everyone will face at least a temporary disability sometime during their lifetime. More specifically, one in three Americans will face at least a 90-day disability before reaching age 65 and, according to the definitive study in this area, depending upon their ages, up to 44% of Americans will face a disability of up to 4.7 years. On the whole, Americans are up to 3.5 times more likely to become disabled than die in any given year.
In raw numbers, over 37 million Americans, or roughly 12% of the total population, are classified as disabled according to the 2010 census. Perhaps surprisingly, more than 50% of those disabled Americans are in their working years, from 18-64. For example, in December 2012, according to the Social Security Administration more than 2.5 million disabled workers in their 20s, 30s, and 40s received SSDI (i.e., disability) benefits.
Many Persons Will Face a Long Term Disability
Unfortunately, for many Americans the disability will not be short-lived. According to the 2007 National Home and Hospice Care Survey, conducted by the Centers for Disease Control's National Center for Health Statistics, over 1.46 million Americans received long term home health care services at any given time in 2007 (the most recent year this information is available). Three-fourths of these patients received skilled care, the highest level of in-home care, and 51% needed help with at least one "activity of daily living" (such as eating, bathing, getting dressed, or the kind of care needed for a severe cognitive impairment like Alzheimer's disease). The average length of service was more than 300 days, and 69% of in-home patients were 65 years of age or older. Patient age is particularly important as more Americans live past age 65. The U.S. Department of Health and Human Services Administration on Aging tells us that Americans over 65 are increasing at an impressive rate:
The Department of Health and Human Services also estimates that 9 million Americans over age 65 will need long term care this year. That number is expected to increase to 12 million by 2020. The Department also estimates that 70% of all persons age 65 or older will need some type of long term care services during their lifetime.
The Council for Disability Awareness provides startling examples of how disability is likely to impact “typical” Americans.
“A typical female, age 35, 5’4", 125 pounds, non-smoker, who works mostly an office job, with some outdoor physical responsibilities, and who leads a healthy lifestyle has the following risks:
The Alzheimer's Factor
Alzheimer's is growing at an alarming rate. Alzheimer's increased by 46.1% as a cause of death between 2000 and 2006, while causes of death from prostate cancer, breast cancer, heart disease and HIV all declined during that same time period.
The 2015 Alzheimer's Association annual report titled, “Alzheimer's Disease Facts and Figures” explores different types of dementia, causes and risk factors, and the cost involved in providing health care, among other areas. This report contains some eye-opening statistics:
Spouses who are caregivers for the other spouse with Alzheimer's or other dementia are at greater risk for emergency room visits due to their health deteriorating as the result of providing care. A study mentioned in the 2010 Alzheimer's Association report found that caregivers of spouses who were hospitalized for dementia were more likely than caregivers of spouses who were hospitalized for other diseases to die in the following year.
Receiving care. According to the National Nursing Home Survey 2004 Study, the most recent of its kind, the national average length of stay for nursing home residents is 835 days, with over 56% of nursing home residents staying at least one year. Significantly, only 19% are discharged in less than three months. Those residents who were married or living with a partner at the time of admission had a significantly shorter average stay than those who were widowed, divorced or never married. Likewise, those who lived with a family member prior to admission also had a shorter average stay than those who lived alone prior to admission.
While a relatively small number (1.56 million) and percentage (4.5%) of the 65+ population lived in nursing homes in 2000, the percentage increased dramatically with age, ranging from 1.1% for persons 65-74 years to 4.7% for persons 75-84 years and 18.2% for persons 85+. According to the U.S. Census Bureau, 68% of nursing home residents were women, and only 16% of all residents were under the age of 65. The median age of residents was 83 years.
See Vol. 4 Issue 5 of the Elder Counselor, The Affordable Care Act: How It Impacts Our Senior Population, for a discussion of the Affordable Care Act’s Impact on information regarding nursing homes.
Long Term Care Costs Can Be Staggering
Not only will many individuals and families face prolonged long term care, in-home care and nursing home costs continue to rise. According to the Genworth 2015 Cost of Care Survey, Assisted Living, Adult Day Services, and Home Care Costs national averages for long term care costs are as follows:
Most Americans Underestimate the Risk
Perhaps most importantly, despite overwhelming and compelling statistics; most Americans grossly
underestimate the risk of disability to themselves and to their loved ones. According to the Council on Disability Awareness 2010 survey:
Given the high costs of care, this underestimation often leaves Americans ill prepared to pay for the costs of long term care.
Long Term Care Insurance May Cover These Costs
If a parent, their spouse, or family member needs long term care, the cost could easily deplete and/or extinguish the family's hard-earned assets. Alternatively, seniors (or their families) can pay for long term care completely or in part through long term care insurance.
Most long term care insurance plans let the individual choose the amount of the coverage she wants, as well as how and where she can use her benefits. A comprehensive plan includes benefits for all levels of care, custodial to skilled. Clients can receive care in a variety of settings, including the person's home, assisted living facilities, adult day care centers or hospice facilities.
Planning in the Event Long Term Care Insurance is Unavailable or Insufficient
Unfortunately, many older Americans will either be medically ineligible for long term care insurance or unable to afford the premiums. In that event, more aggressive planning should be considered as early as possible to make sure life savings are not depleted as a result of having to pay out-of-pocket for care. With the help of an elder law attorney, a plan can be created that will protect much of the assets of an individual or couple that would otherwise be at risk of being depleted.
All Planning Should Thoroughly Address Disability
When a person becomes disabled; he or she is often unable to make personal and/or financial decisions. If the disabled person cannot make these decisions, someone must have the legal authority to do so. Otherwise, the family must apply to the court for appointment of a guardian over the person or property, or both. Those who are old enough to remember the public guardianship proceedings for Groucho Marx recognize the need to avoid a guardianship proceeding if at all possible.
At a minimum, seniors need broad powers of attorney that will allow agents to handle all of their property upon disability, as well as the appointment of a decision-maker for health care decisions (the name of the legal document varies by state, but all accomplish the same thing). Alternatively, a fully funded revocable trust can ensure that the senior's person and property will be cared for as desired, pursuant to the highest duty under the law - that of a trustee.
The above discussion outlines the minimum planning everyone, including seniors and their loved ones, should consider in preparation for a possible disability. It is imperative that families work with a team of professional advisors (legal, medical and financial) to ensure that, in light of their unique goals and objectives, their planning addresses all aspects of a potential disability. Our firm is dedicated to helping seniors and their loved ones work through these issues and implement sound legal planning to address them. If we can help in any way, please don’t hesitate to contact our office.
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.
Contact the Levy Law Firm to learn about the changes to the net worth limitation, look back period and penalty period in connection with applying for the VA pension.
Announcing the LEVY LAW FIRM Manhattan location in the historical Woolworth Building located at 233 Broadway, New York, NY 10279
April 26, 2018 was a beautiful day for the Annual Hot Sauce party sponsored by the Atria, Nothing Forgotten and Senior Helpers, on the rooftop of the NYC Atria on 86th Street, overlooking the Hudson. In attendance were elder care professionals such as Comfort Keepers, Humana, Right at Home and Alliance Homecare, among many more elder professionals, too numerous to mention. The party was an opportunity to enjoy the elusive spring sun and to discuss the daily challenges elder professionals face. One such challenge that faces the Levy Law Firm is educating clients how Trusts are an effective elder planning tool. There are twelve main reasons why Trusts should be considered for anyone who is interested in creating or updating his or her Trust as follows:
The Dutch Train Elders how to Fall. https://www.nytimes.com/2018/01/02/world/europe/netherlands-falling-elderly.html
The Ethics of Medicaid Planning is on Par with Claiming Income Tax Deductions; Both are Responsible Strategies to Preserve Assets.
While mingling with Orion colleagues on the Atria 86 rooftop with other Elder Planning Professionals on July 20th, I was reminded of the important work we do for our clients who engage us to help them preserve their assets. There was a sense of relief among us that the Affordable Care Act, which includes Medicaid benefits, is safe for now. However, Medicaid is under attack lately by groups that mostly consist of business owners and corporations that deduct business expenses and losses from profits on their income tax returns to preserve their assets. But just as deductions are a legitimate income tax strategy, so is Medicaid planning to preserve assets.
Judge Learned Hand, a New York Court of Appeals Judge, held in Helvering v. Gregory, that "Any one may arrange his [or her] affairs so that his [or her] taxes shall be as low as possible; he [or she] is not bound to choose that pattern which best pays the treasury; there is not even a patriotic duty to increase one's taxes.” Helvering v. Gregory, 69 F.2d 809 at 810. (2d Cir. 1934). Additionally, Judge Hand's dissent in Commissioner v. Newman although not probative, is frequently referred to in support of not voluntarily paying taxes by admonishing that “Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.” Commissioner of Internal Revenue v. Newman, 159 F.2d 848 at 851 (2d Cir. 1947).
Based on the principals set forth above it is clear that everyone has a responsibility to "arrang[e] one's affairs" so that his or her taxes are as low as possible whether they are "rich or poor". Helvering at 810, Newman at 851. Morals and ethics are not a consideration. Since this is true, Medicaid planning can be applied in this context and is on par with income tax planning.
The July 22, 2017 NYT article by Ron Lieber, “The Ethics of Adjusting your Assets to Qualify for Medicaid”, questions whether it is ethical to preserve ones assets by using strategies qualifying oneself for Medicaid. However, planning to become eligible for Medicaid is no less ethical than when businesses owners or corporations claim tax deductions such as losses and capital improvements on their income tax returns to preserve assets; both burden taxpayers. While planning to avoid paying income taxes and planning for Medicaid are not completely analogous, the outcomes have the same result. Both concepts ethically “arrang[e] one affairs” to his or her personal advantage to preserve assets, but cause funds to be diverted from the tax base, thus causing a further burden on taxpayers. Id. at 810.
Since the ethics of the above case law is applicable to Medicaid planning, perhaps Mr. Lieber’s next NYT article will pose the question regarding whether the U.S. has a moral and ethical responsibility to provide care for our seniors and disabled people who medically qualify for Medicaid. I have first hand experience as an Elder Planning attorney and as a frequently appointed Court Evaluator for Article 81, NY Mental Hygiene cases regarding care for these people, who are among the most vulnerable in our society. It is difficult when they have family to assist them with planning. It becomes a crisis when seniors and disabled people are “orphaned” and have no one to advocate for them. Often times these orphaned people are treated as throwaways. As an advanced society, do we have a moral and ethical duty to care for these people?
Mike and Marcia Perna at their home in Dedham, Mass. Ms. Perna’s mother, Rita Sherman, died last year at age 94 after a diagnosis of dementia and five and a half years in a nursing home.
Check out 6 great elder planning resources in NY:
On April 27, 2017, I attended a roof top event sponsored by HomeTeam for Elder Planning professionals. A group of us spoke about the number one question elder clients ask us, which is, "When do my parents need to begin planning for Long Term Care." Nearly all of us have a family member who is significantly aging, has health issues or needs some assistance with activities of daily living. With advances in medicine, Americans are now living longer than ever before. The statistics show that 1 in 2 Americans will need long term care at some point in their lives. But while living longer can be a blessing, aging also has significant physical and mental challenges that require third party assistance. Furthermore, many older adults live alone, without a support system and face these challenges alone. I am frequently appointed by the Court as a Court Evaluator pursuant to Article 81 of the NY Mental Hygiene Law for proceedings to appoint a Guardian of a person who is unable to manage their personal and financial property. These situations are often dire. If you have loved ones who have not yet engaged in advanced planning, there are three alternatives in New York for them to consider in order for them to maintain their lifestyle in a dignified manner and get care they need.
Long Term Care (LTC) insurance - Almost all LTC policies currently offer an in-home care benefit when the insured is unable to perform two activities of daily living (eating, dressing, bathing, transferring, toileting and continence). However, LTC insurance is only offered to people who qualify both physically and mentally, and typically who are under the age of 79. Additionally, these policies can be expensive, and can become more expensive when the NYS Department of Insurance authorizes the LTC insurance carriers the right to raise traditional LTC insurance policy premiums. An alternative to traditional LTC insurance are hybrid policies, which are life insurance policies with LTC insurance rider. Currently, hybrid policies do not experience premium increases since they are deemed life insurance products. However, hybrid policies pay LTC benefits, if and when needed. Hybrid policies, while marginally are more expensive than traditional policies, provide more flexibility and are a great LTC planning option.
Medicaid planning If LTC insurance is not an option because you can not qualify or it's too expensive, then the next best alternative is Medicaid planning. The biggest concern with Medicaid planning that I come across is that people are afraid, "Medicaid will take my house." Medicaid does not take houses. This is a misconception...Medicaid may place a lien on house, (without proper planning) but it does not take houses. Medicaid is available for people who are medically and financially eligible. Proper planning with an Elder Planning attorney can assist people to become financially eligible for Medicaid so they can receive in-home, assisted living or nursing home care. For in-home care, depending on need, aides are sent to the Medicaid applicant's home by a Management Long Term Care (MLTC) provider after the Medicaid application has been approved. The number of hours for in-home care will be determined at the assessment. It is imperative to have an Elder Advocate at the time the MLTC assessment is conducted to ensure the elder receives the right outcome. If in-home care is not safe, or socialization is a concern, then certain assisted living facilities such as Amber Court, accept Medicaid benefits, as well as most nursing homes.
Private Pay - Spending down personal resources to obtain personal aides for in-home care, companion care, geriatric physician in-home care, in-home concerts, tax and financial planning, daily money managers who assist paying bills and employee payroll resources are available to the older adult who can afford to stay at home and maintain a life style they are accustomed to.
Clearly, there are many solutions for our aging adults. It is imperative that planning begin early so that the best options remain available. The Levy Law Firm can refer you to any of the resources that have been referenced in this article.