Traditionally, estate planning has focused primarily on what happens when you die and how you would want your estate distributed. Wills and trusts would be used to tackle issues of avoiding probate, reducing taxes, and distributing your estate to your intended heirs. While that is still important for us to address, these days, those can be easier issues for us to solve.
As life expectancies have increased, the likelihood of needing some form of long-term care in our lifetimes has also increased. Because of this, we need to pivot from traditional estate planning and incorporate long-term care into estate planning. Here are some common estate planning tools we use to plan for long-term care:
A trust is an arrangement whereby property is legally owned and managed by an individual or corporate fiduciary as trustee for the benefit of another who is the equitable owner of the property. A trust is commonly used in estate planning as a substitute for a will, as a trust can allow you to avoid probate and maintain privacy, but trusts can also be used for long-term care planning.
A revocable living trust allows the trustmaker to detail a plan for how they want their assets maintained if they become incapacitated while also maintaining the power to make changes to any portion of the trust up until the moment of death. This means that if you wished to change who you want to take care of your assets if you develop Alzheimer’s or Dementia, you would have the power to make that change.
An irrevocable trust is a little bit different from a revocable living trust. An irrevocable trust must have at least one provision in it that cannot be changed and usually cannot be terminated or revoked by the trustmaker. Irrevocable trusts are useful tools when planning for the possibility of future use of Medicaid benefits. When used right, an irrevocable trust can help avoid the government trying to take your house via Medicaid estate recovery if you ever need to use Medicaid benefits to pay for long-term care.
2. Health Care Power of Attorney
A Health Care Power of Attorney is critical for anyone who wants to protect their well-being and wants to spare their loved ones from likely pain and aggravation. A Health Care Power of Attorney allows you to name the person (your agent) that you want to make your health care decisions if you are unable to make those decisions yourself. It also allows you to let your agent know how you want your healthcare decisions to be made. Without a Health Care Power of Attorney, your loved ones would have to go through a lengthy court process known as Guardianship just to be able to make decisions for you if you are incapacitated and unable to make those decisions for yourself.
The Health Insurance Portability and Accountability Act (HIPAA) strictly protects who may access your medical records. A Health Care Power of Attorney should include the appropriate language to ensure that your appointed healthcare agent will be able to access your medical records to be better equipped to make an informed decision regarding your treatment.
3. Living Will
A Living Will (also known as an “Advance Directive for a Desire for a Natural Death”) is a document in which you provide instructions to your Health Care Agent and health care providers regarding whether or not you want life support and life-sustaining measures in an end-of-life scenario. While it is intended to tell your Health Care Agent how you want to be cared for while you are living, many think of it as the “pull the plug” document.
A Living Will helps to relieve your loved ones of feelings of uncertainty when trying to decide what you would or would not want in terms of your long-term care. Even if you are incapacitated, your wishes can still be followed when you have provided your Health Care Agent and loved ones with a Living Will.
4. Paying for Care
When we incorporate long-term care planning into our estate planning, we can develop a plan for how to pay for care, whether it be needed now or in the future. There are a variety of options for paying for long-term care, so it is important to have a plan that is best tailored to your specific needs.
Ways to pay for long-term care can include Medicaid benefits (as mentioned above), Veterans benefits, long-term care insurance, an annuity with a long-term care rider, life insurance with a critical care rider, and more. Because of the vast array of options to pay for long-term care, it’s important to develop your plan with an experienced elder law attorney so that your plan works best for you.
Need to Get Started on Developing a Long-Term Care Plan?
Our team at Carolina Family Estate Planning and the Alzheimer's Planning Center understand that developing a long-term care plan is about not just protecting your independence and dignity, but also protecting those you love from the physical, emotional, and financial toll that caring for a loved one can take.
We’ve helped many clients take an interdisciplinary approach to their long-term care planning by exploring both legal, financial and care options. A well-rounded long-term care plan will usually involve a combination of legal, health care, and financial tools to meet your goals and maximize your protection. To get started, register for an upcoming seminar to learn more or call our office at 919-443-3035.