The New Paradigm in Estate Planning for Seniors – Planning for Long-term Care

In 1900, the average lifespan in the United States was 48.7 years. Planning for disability and long-term care was not an issue. People didn’t live long enough to retire. And most could not have retired anyway. There were few pension plans at that time, and it would be 35 years before social security existed. IRAs and 401ks would not be created until the 1970s. Generally, people worked until they died or their family took care of them.

For those who weren’t able to work, and didn’t have families to take care of them, money became a problem. Poorhouses, which were operated and funded by the counties, did not get the job done. I have not found any record of a poorhouse in Wilson County, which is where I live. But there were poorhouses in Nash, Edgecombe, Wayne and Johnston counties. Nash County had a poorhouse called “Wardens of the Poor" until 1923.

The problem was especially great after then Great Depression, when unemployment exceeded 20%. The Social Security Act was passed in 1935 to help alleviate the problems created by the growing number of destitute seniors. In his opinion approving the constitutionality of the Social Security Act, Justice Benjamin Cardozo explained that “[t]he hope behind this statute is to save men and women from the rigors of the poorhouse, as well as from the haunting fear that such a lot awaits them when journey's end is near."

By 1950, Americans lived an average of 68.2 years. Planning for long-term care was still not a huge issue. Estate planning often consisted of a simple Will. As people continued to live longer, powers of attorney became more prevalent. In 2012, the average lifespan was 78.8 years. The poorhouse is no longer a haunting fear. But the nursing home is. And the concern is not just living there. The concern is paying for it.

For most people, this means that estate planning is not just planning for death or a short-term period of incapacity. It should include a plan to pay for long-term care. Just saying you don’t plan to live in a nursing home is not a good plan. Nobody does. But the U.S. Dept. of Health and Human Services estimates 70% of all people over age 65 will need some type of long term care. The cost of skilled nursing in North Carolina averages $75,190 per year for a semi-private room. So a 10-year stay in a skilled nursing facility will cost more than $750,000.

Planning for long-term care is much more complicated than most of my clients think. Many are completely surprised that Medicare doesn’t pay for long-term care except under limited, short-term circumstances. Others seem offended that they (or their parents) must spend their own money paying for a nursing home instead of just giving it away and letting the government pay for their care. Qualifying for benefits to pay for long-term care is not easy. And with the number of seniors in N.C. projected to double between 2010 and 2030, it almost certainly has to get harder to qualify for those benefits. 

Many of my clients who come in to discuss estate planning want to talk about who gets their stuff. But unless their estates are extremely large, we often spend a great deal of time talking about whether or not there will be anything left at their death. Fortunately, you can create an estate plan that also considers the cost of long-term care. Unfortunately, your “simple will” and standard power of attorney won’t do that.

Every situation is different, and there are a multitude of tools that can be used to fund long-term care and protect certain assets. Most of the time, the funding involves your cash, some type of insurance product, or both. But we can also set up ways to protect your home, your family farm, or a “safety net” of cash for your children. In most cases, we add a stand-by supplemental needs trusts to your Will to protect your spouse. In almost every case, we add certain enhanced powers to your power of attorney to ensure that certain types of emergency planning can be completed when you are not capable of doing so yourself. We also coordinate your powers of attorney, wills and trusts to work together in specific ways.