America’s Population Is Aging and Estate Planning Must Transition to Addressing the More Complex Issues of Americans Living Longer
Let’s Explore the Reality of America’s Aging Population
Every day, more than 10,000 people turn age 65. By 2030, nearly one-fifth of all Americans will be age 65 or older. Over Five Million Baby Boomers per year (5,000,000 …Wow) will retire each of the next 15 years. The number of individuals requiring planning to address their retirement and end-of-life planning will be substantially different from that of prior generations due to living longer. As a result, life care issues associated with aging and declining health will become even more significant. Besides the sheer number of aging persons, consider the geographic diversity of families throughout the country. The fact that adult children have both spouses working (sandwich generation), the ongoing breakdown of the traditional family setting, childless couples, unmarried persons with little or no surviving family, and a host of other factors make planning more important than ever to protect a lifetime of savings and income for older and aging persons.
Planning for Aging and Chronic Illness
“Planning for aging” (I think this term accurately summarizes the contents of this page), must address the potential for mild, moderate and/or severe cognitive and/or physical incapacity including chronic disease, and illness and long-term care.
It also requires the expertise and assistance of an experienced Elder Law and Estate Planning attorney who is in touch with the evolving needs of an aging population and their personal financial planning and other matters generally not addressed by many lawyers who list their specialty or practice as “estate planning attorneys”. Forgive my brief commercial interruption but that’s why Hanlon Niemann & Wright is unique. We address your needs as part of our Estate and Life Care practice. Let me explain this further to you, starting with a discussion about chronic illness.
Aging, Sickness, and Physical Decline
Chronic illness and disease are far more common than many realize. A recent comprehensive article I read states that there are 130 Million Americans living with chronic illness, including
- 12 million Americans living with COPD, (with Millions more not diagnosed)
- Over 5 Million People with Alzheimer’s disease
- 5 million Persons have some form of significant brain injury either as an isolated injury and/or along with other injuries
- 400,000 Americans have Multiple Sclerosis (MS)
- 1 million Americans live with Parkinson’s disease
The above are just a few of the health challenges many persons face (or will face) as they get older. Every person’s experience of disease is unique to him or her, including the disease progression, available support systems, financial resources and personal attitude towards addressing the disease/illness.
Then you have those individuals with chronic illnesses where the symptoms are either invisible or very subtle in their presentation. For these person(s) it’s a gray area between being physically independent and/or competent in their decision making. What if balancing a monthly bank statement is adversely affected, but the person has the capacity to make most life decisions? Let’s examine how three of the most common chronic illnesses may have a different impact on a person and his/her need for planning each day of their life.
Cognitive Impairment and Chronic Illness Affects Millions of People in America
Cognitive Impairment, Diseases & Illness
Alzheimer’s/Dementia (AD), Lewy Body Disease, ALS, Picks Disease
The harsh reality is that Alzheimer’s/Dementia will cause multiple cognitive malfunctions and eventually, death. In the early stages, a person will be fully capable of engaging in all phases of life, including financial and life care planning. He or she is perfectly capable of signing legal documents.
Thereafter it will become important to objectively estimate what stage of the disease the person has and how quickly he or she will decline, so that planning can be completed in time. Knowing that dementia will occur as a result of Alzheimer’s, makes it imperative to create safeguards (in advance) to minimize the likelihood of financial abuse in the future. Merely signing a durable power of attorney or revocable trust alone may be insufficient. Having a trusted person available to review statements can intercept problems if a person’s abilities decline faster than anticipated and can serve as an important check and balance. I call this person a “financial monitor” in my documents. A higher level of protective planning can (perhaps, must) be created by way of a revocable trust with an honest and reliable family member including a child/sibling/close relative or a corporate co-trustee (i.e., a bank or trust company) to serve as trustee. Such a trust can even incorporate a provision that mandates periodic evaluations by an independent care manager to assure the person’s physical safety and well-being. Lifecare managers can be extremely helpful when a person has little or no surviving family or is geographically remote from their support location(s).
Lupus, Multiple Sclerosis (MS), New Romyelitis, Chorioretinopathy
To me, MS, ALS and related diseases are the most terrifying because they can (and do) strike young people, often in midlife. Many patients living with MS are concerned about their condition deteriorating over the coming years. Consequently, planning for MS (and all other similar degenerative diseases) is to plan for the reality of their future condition. Legal documents generally should include a power of attorney that is effective immediately and not at some point in time in the future. Individuals with MS and other degenerative conditions need to place as much of their financial life on autopilot (i.e., auto-payment/deposit) as feasible. That way, if the person cannot handle his or her financial matters independently and/or for extended periods of time (i.e. a week or month) because of symptom flare up’s the basics of their important financial obligations will be in order (i.e. utility payments, social security deposits, etc.) Similarly, if the person has a revocable trust, the disability clause allowing another person or entity to serve as trustee or co-trustee can be written to allow contemporaneous assistance by the co-trustee. Of course, there are many considerations involved when the term “disability” and/or the onset of the disability is discussed. It is a topic that must be addressed. I touch upon it later on this page.
Tremors and Parkinson’s Disease (PD)
Recognition of Parkinson’s is often obscured. Many times, the symptoms are not readily apparent. The disease compromises motor skills especially handwriting which over time becomes cramped and uneven. A dramatic change(s) in handwriting can result in a bank and/or other third party refusing to accept a signature because it may not match the signature on file. A third party may even request documents to include three or more different signatures of the person, to reflect the more significant variations in signatures. Don’t minimize what I just said. Years ago, I had a bank refuse to accept my check because my signature was materially different than the signature card on file. As a result, I had to go to the bank and redo my signature card to identify it as my signature. (My daily signature is often controlled by my “mood” as I call it and I know it). Not only should legal documents be written to address the person’s challenges, but also, the family must take practical steps to safeguard the person as the disease and/or the challenges of aging start accelerating the decline.
Dealing With the Challenges of Getting Older and Being Part of the Aging Generation
Some Possible Options to Safeguard Aging Persons Include:
- Creation of a revocable trust with “safety measures” built in, such as a co-trustee. If family relationships are fractured or limited in numbers, perhaps a corporate trustee or trust company should be named, but not a large bank or trust company. I’ll be happy to share with you my experiences with larger corporate trustees and family members who serve as trustees.
- Safeguards within a durable power of attorney can be drafted when appropriate. Included in the power of attorney can be the appointment of an independent person as a “monitor” financial or otherwise to review the actions of the agent. A provision can be inserted that mandates that duplicate monthly statements be sent to the monitor so that some level of review is available. This suggestion may not be possible in many situations and may prove to be unworkable but it is offered for your consideration as well as for the consideration of aging family members.
- Consolidate assets to a single financial institution to avoid assets “falling through the cracks” if cognitive or other issues make it difficult for the individual to capably monitor all of his/her finances. This really makes a lot of sense and is a frequent recommendation I make to family members. So often I find older clients with five (5) or more banking/checking accounts with funds just sitting there. There is seldom a good reason to have so many accounts.
So, What Should Be Done?
Today’s Single, Divorced, and “Alone” Retiree
Remember, the challenges faced with aging and/or chronic illness are different than those faced by younger persons. There is a greater risk that an older and/or sicker person may be taken advantage of by those with access to the person’s financial assets, whether intentionally as a fiduciary, or unintentionally. There are many reports (I’ve seen a lot firsthand) of clients whose children, caretakers, and/or others, have taken nearly everything of value, but left behind the aging, sick family member.
Then there are the broken and geographically separated families, divorced families, families dealing with changing beliefs about social philosophies, and religious beliefs that all combine with other considerations to make Estate Planning different from even twenty-five (25) years ago.
Planning for Aging, Sometimes Called Later Life Planning
Introduction and Background
The reality is that getting older means many things
Forever (well ever since I became a lawyer…) estate planning attorneys have focused primarily on minimizing death and inheritance taxes paid to the government. Fear of the Federal and N.J. governments stealing 30-50% percent of a person’s life’s savings have motivated aging and successful individuals to seek estate planning help from financial planning, accounting and legal professionals.
Since President Bush and President Trump the Federal Estate Death Tax has been significantly reduced and non-tax considerations are (or now should be) the emphasis of estate planning. Even tax addicted New Jersey in 2016 started to reduce its obnoxious estate tax and on January 1, 2018, the death tax ended…Yes, ended. But don’t count on it to last, we’ll see, especially with our newly re-elected Governor.
Today more and more aging Baby Boomers anticipate living for two or three more decades past “retirement” age. As a group they are less concerned about death taxes and more interested in their health and having sufficient money to live on in the future. Foremost on their minds is whether he or she will have adequate cash flow for the post- retirement expenses of living longer.
Many boomers (and their surviving spouses) are focused (and fearful) about Alzheimer’s disease, MS, dementia and other cognitive and motor skill diseases.
These diseases have become the symbol (and the fear) of aging even more so than the estate death tax. It’s this fear of declining slowly over an extended number of years that is motivating individuals to act now.
What Is Life Care Planning and Why It Matters?
Lifecare planning should be part of a person’s estate planning for the ninety-nine (99%) percent of persons who will not be subject to a federal estate death tax and hopefully the New Jersey death tax. The term “life care” planning means much more than just estate and/or retirement planning. It includes all the elements of traditional retirement planning (investments, budgeting, and longevity projections) plus the legal aspects of estate planning (i.e. creating powers of attorney, health care proxies, living Wills, trusts, wills) and more.
Let’s discuss the steps you can take today to keep in control of your finances and your life for as long as possible, especially if you anticipate being active well into your later life.
Retirement Planning Does Not Mean Just Financial Planning
The traditional view of planning for retirement has generally anticipated that:
- A person will retire at age 65.
- The person will spend less money in retirement than prior to retirement
- The person will live in the same home and the same geographical location
- The person will not work in retirement.
- The person will remain married to the same person.
These historically accurate assumptions about retirement and retirement planning are being challenged in many ways today. As a result, estate planning needs to adjust to this new reality.
People today are retiring at later ages and even after formal retirement many are working part-time for many reasons including their mental health, and because they want to!
The focus on residency and domicile has now become a point of serious deliberation. With potentially two or three decades of post-retirement life, relocating from a home of 20-plus years may be an important step to consider in the planning process. The reason is because of the impact that the combination of income taxes, property taxes and cost of living will have upon affordability, especially in New Jersey which is a cost prohibitive state to live in.
One consideration for future life care planning will be an increased use of revocable trusts. I’m not a big advocate of trusts during middle age and early post-retirement but I do recommend them under appropriate circumstances, especially if financial abuse and/or exploitation is evident or suspected. The risks of elder financial abuse and exploitation are compelling. Whatever the statistics are (see my dedicated website on NJ Elder abuse…. discussion of elder financial abuse and exploitation – click here) most elder financial abuse is either undetected or under-reported and of those situations which are identified, most are unreported because either family members are involved or there is no one adversely affected that has knowledge of the situation. If you would like to discuss whether a trust is appropriate for you, contact me today toll-free (855) 376-5291 or email me email@example.com.
A durable Power of Attorney, Living Will and Health Care Directive is an important component of this retirement planning.
Housing Alternatives to the Single Family Home in the Suburbs
Planning for aging must also address where you will live. A number of issues come to mind, such as:
- Will it be feasible for you to physically continue to live in your current home? Based upon financial realities (budget and other projections) can you afford to keep your home? Might a reverse mortgage be useful now or in the future to stay in your home?
- Would downsizing now or in the future improve your financial status? What are the real costs (monthly, annual) of maintaining the home over the longer term? Many individuals (regardless of age) really are not aware of what it actually is costing them to live at their homes.
- Is/are modification(s) to the home necessary or desirable? How will the expense be paid for? Will the improvement qualify for a medical expense deduction on your income tax return?
- Might you be able to reduce expenses, by finding a more accessible and flexible environment, and thereby making your future more physically and financially secure, by moving to a different home?
- If you are near or already in retirement it may be the ideal time to reassess all aspects of your life. Perhaps it’s time to consider relocating to a different community or even a different state, where the cost of living is lower more accessible/affordable housing is available.
A comprehensive evaluation and plan for your future place of residence is critical. The analysis goes beyond property taxes and costs of ownership. Here is how I would approach this topic.
- How old are you?
- How’s your health and the prognosis for your future physical health. A high percent of people over age 85 have or will have some degree of dementia. What is your current mental health status? What is the prognosis? What can be done to protect you in your home if dementia occurs or worsens? Where do family relatives live and how close are you to medical providers and others in your support network? Do you have a support network?
- Who is available to help you or a loved one and does residing at your current home improve or hinder this assistance? What reasonable steps can be taken now or in the future to modify the home (e.g. ramps, elevators, etc.) and at what cost, to enable you to continue residing in the home? Will government or other programs fund these costs?
- If you experience a significant illness or become incapacitated will you still want to reside at home?
- Do your estate planning documents (and those of your significant other or spouse, if married) conform to your wishes about staying at home or elsewhere? Is your designated agent/fiduciary named in your legal document(s) able to sell the residence when the time comes? Are you sure? Have these fiduciaries been granted adequate legal authority, and available resources, to fund the maintenance of your residences?
- Have you given thought to a residential care facility for aging persons including assisted living, residential group care home(s), retirement home(s), continuing care retirement communities and other residential options for aging in place? A complete evaluation of housing options is a prerequisite to determining the best option for a person’s home.
- What is the physical status of the house itself (is it sorely in need of repairs? Major or minor? If major how costly will the expense(s) be?)
- Are any governmental programs available that will reduce the cost of you (or a loved one) staying in your home?
Maximize Your Income Tax Planning for the Common Expenses of Aging
Aging is always accompanied by an increase in Health care related costs. Medical and related expenses can be substantial. A medical expense deduction on your federal income tax return (not N.J. however) may be allowed for special equipment and home improvements if the main purpose is medical care and the accommodation of physical limitations (i.e.) adding an accessible entrance ramp, installing a lift, widening doorways, building handrails, modifying a bathroom, kitchen cabinets, etc. but note that you cannot deduct expenditures to the extent of any increases in the value of the home.
To be certain of eligibility for the medical expense deduction on your income tax return, you must research the likelihood that the proposed expenditures will qualify as deductible medical expenses. To maximize the deduction, one must identify the purpose for incurring the expense? Be sure a physician has recommended the expense as necessary to treat a diagnosed medical condition? Can you establish that the expenditure would not have been made but for the disease or illness?
If you become physically or mentally incapable of self-care and need to move to assisted living or a life care community, you still qualify for the capital gain exclusions of $250,000.00 – $500,000.00 (depending on your marital status) when/if you sell your home.
Sometimes Life Sucks, Particularly for Middle Aged Adolescents Suddenly Facing a Chronic Health Condition
Retirement Due to Health Changes
When Disease Strikes Young
Chronic and/or degenerative illness which compels retirement earlier than anticipated due to health challenges often happens. I see it frequently in my practice. Early on-set cognitive and physical declines will dramatically change a person’s/couple’s future. Disability planning now becomes critical for those individuals. A disability life care plan for individuals in their 40’s and 50’s and 60’s should be done with full consideration of the projected life expectancy still ahead of the person at their present younger age which will (generally) leave them with less income and savings to meet existing family expenses and future care costs. Some individuals with chronic disease have normal or close to normal life expectancies.
Getting Divorced When You’re Old(er)
The divorce rate for Americans over the age 65 has exploded. Fully one out every four people experiencing divorce in the United States is 50 or older, and nearly 1- 10 is 65 or older. More than half of these divorces are to couples in first marriages. Many of these divorces are between couples married for more than 20 years.
I have generally assumed (apparently incorrectly) that any couple married for 30 + years is unlikely to divorce. But the statistics tell a different reality. There is a real risk of getting divorced later in life.
As a result, retirement planning must address divorce after age 65.
To The Children & Family Living at a Distance from a Parent or Loved One
Many children live far from an elderly parent or loved one. They want someone close to the home who is a respected and trusted professional available to provide independent advice and recommendations directly to them without others filtering this information.
A trusted Elder care attorney can remain involved with the person and the family and offer regular updates. Consider Hanlon Niemann & Wright as your local presence in New Jersey. Talk to me about how we can help your aging parent and/or loved one(s) or disabled family members. You can contact me at (855) 376-5291 or email me at firstname.lastname@example.org; it’s my pleasure to be of assistance.
Isn’t it Time You Get Serious About Your Estate Planning Future?
The Biggest Obstacle is Taking that First Step
One of the most important things I can do for clients as an Elder law Attorney is to encourage people to start their estate planning. This is important because it takes time to accept the reality of getting older and to accept the reality and limitations of age and/or illnesses. As time passes, the opportunity to engage in meaningful Life care, Estate and financial planning may be lost. If you’re reluctant or unwilling to embrace the benefits of the planning process (or for any reason(s)) while your cognitively and physically still capable of doing so, your health may deteriorate to the point where meaningful options to complete the process will be lost. Maybe I just hit a nerve with what I just wrote; maybe you or your loved one is already experiencing a loss of physical and cognitive function, changes in or loss of important personal relationships and more. Coming to terms with the consequences of all these “changes” and moving forward to proactively plan, requires that you talk to an experienced Elder law and Elder Care attorney at Hanlon Niemann & Wright. We excel in our real life professional guidance of clients, because we are known for our trusted experience and thoughtful advice.
So, What Will You Do?
Aging and end of life issues cause strong feelings and emotional responses. They can be difficult topics for anyone and their families to address.
It will be my professional honor to provide you and those who love you and/or care for you with objective and knowledgeable advice to assist you in weighing the options available with a Life Care and Estate Plan.
To discuss your NJ Estate Planning matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at email@example.com. Please ask us about our video conferencing consultations if you are unable to come to our office.
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Estate Planning Attorney