Estate Planning for Aging and Chronic Illness

America’s Population is Aging, and Estate Planning Must Transition to Address the Complex Realities of Americans Living Longer

Let’s Explore the Legal Issues Facing America’s Aging Population

The Facts

Every day, more than 10,000 people turn age 65. By 2030, one-fifth of all Americans will be age 65 or older. Over Five Million Baby Boomers per year (5,000,000 … Wow) will retire over the next 15 years. The number of individuals who require planning to address retirement and end-of-life decision-making will be substantially different from prior generations solely because people are 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; that married adult children are both working (sandwich generation); the traditional family setting is breaking down; there are more childless couples; many unmarried persons have little or no surviving family, and a host of other factors make planning more critical than ever for each group of individuals identified above to protect a lifetime of savings and income.

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 and disability, including chronic disease, 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, their personal financial planning, and other subjects generally not addressed by many lawyers who list their specialty or practice as “estate planning attorneys”. Forgive my brief commercial interruption; that’s why Hanlon Niemann & Wright is unique. We address your needs as part of our Estate and Life Care Planning practice. Let me explain this further, starting with a discussion of chronic illness.

Aging, Sickness, and Physical Decline

Chronic illnesses and diseases are far more common than many realize. A recent comprehensive article I read states that 130 million Americans are living with chronic illness, including

Twelve million Americans are 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 people face (or will face) as they get older. Every person’s experience of disease is unique to them, including the progression of the disease, 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 whether they are physically independent and/or competent in their decision making. Balancing a monthly bank statement may be adversely affected, but does the person have 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 Affect Millions of People in America

Cognitive Impairment, Diseases & Illness

Alzheimer’s/Dementia (AD), Lewy Body Disease, ALS, Pick’s 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, and over time, it will become important to objectively estimate the stage of the disease the person has and how quickly he or she will continue to 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 capabilities decline faster than anticipated and can serve as an essential check-and-balance. I call this person a “financial monitor” in my documents. A higher level of protective planning may also justify the creation 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 include a provision mandating periodic evaluations by an independent care manager to ensure the person’s physical safety and well-being. Lifecare managers can be invaluable when a person has little or no surviving family or is geographically remote from their support location(s).

Lupus, Multiple Sclerosis (MS), New Remyelinating Disorder, 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 time. Consequently, planning for MS (and all other similar degenerative diseases) is to prepare for the reality of their future condition. Legal documents generally should include a power of attorney that is effective immediately, not at some point in the future. Individuals with MS and other degenerative conditions need to place as much of their financial life on autopilot (i.e., pre-scheduled electronic payments/deposits) 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-ups, their significant 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 enable contemporaneous assistance by the co-trustee. Of course, there are many considerations when discussing the term “disability” and/or its onset. 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, primarily 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 that include three or more different signatures of the person to reflect the more significant variations in the person’s signature. Don’t minimize what I just said. Years ago, I had a bank refuse to accept my check because my signature was materially different from the one on file. As a result, I had to go to the bank and have my signature card reissued to confirm it was 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 the family must also take practical steps to safeguard the person as the disease and/or the challenges of aging accelerate 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 agent’s actions. A provision can be inserted that mandates duplicate monthly statements be sent to the monitor, ensuring some level of review. This suggestion may not be possible in many situations. It may prove unworkable, but it is offered for your consideration as well as for that of aging family members.
Consolidate assets and banking to a single financial institution to avoid funds “falling through the cracks” if cognitive or other issues make it difficult for the individual to monitor all of his/her finances capably. 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, all of which 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% of a person’s life’s savings has motivated aging and successful individuals to seek estate planning help from financial, accounting, and legal professionals.

Since the presidency of President Bush, the Federal Estate Death Tax has been significantly reduced, and non-tax considerations are (or should now be) the emphasis of estate planning. Even tax-addicted New Jersey abolished its obnoxious estate tax on January 1, 2018. Yes, ended. But don’t count on it to last; we’ll see.

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 to cover 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 the fear of a gradual decline over an extended period that is motivating individuals to act now.

What Is Life Care Planning and Why Does It Matter?

Lifecare planning should be part of a person’s estate planning for the ninety-nine percent (99%) 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, and 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 between the ages of 60 and 70; 65 being the conventional age.
The person will spend less money in retirement than before retirement
The person will live in the same home, and the exact 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 by a new reality. As a result, estate planning needs to adjust to this new reality. Here are some examples:

People today are retiring later, 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 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 essential step to consider in the planning process. The reason is that the combination of income taxes, property taxes, and the cost of living will affect affordability, especially in New Jersey, which is a cost-prohibitive state to live in.

Legal Documents

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), elder financial abuse is either undetected or under-reported. Of the identified situations, most go unreported because either family members are involved or no one adversely affected knows the problem. If you would like to discuss whether a trust is appropriate for you, contact me today at (732) 863-9900 or email me fniemann@hnlawfirm.com.

A durable Power of Attorney, Living Will, and Health Care Directive are essential components of this retirement planning. I have written a detailed website page on Powers of Attorney and Health Care Directives. To learn more, click here.

Housing Alternatives to the Single-Family Home in the Suburbs

Planning for aging must also address where you will live. Several issues come to mind, such as:

Will it be feasible for you to continue living in your current home? Based upon financial realities (budget and other projections), can you afford to keep your house? Might a reverse mortgage be beneficial 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 costs them to live in 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, and more accessible/affordable housing is available.

A comprehensive evaluation and plan for your future residence are critical. The analysis goes beyond property taxes and costs of ownership. Here is how I recommend you approach this topic.

How old are you?
How’s your health, and what’s the prognosis for your future physical health? A high percentage 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 house? 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 considered a residential care facility for aging persons, including assisted living, residential group care home(s), retirement home(s), continuing care retirement communities (CCRC), and other residential options for aging in place? A complete evaluation of housing options is a prerequisite to determining the best choice 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

Medical Expenses

Increased healthcare costs always accompany aging. Medical and related expenses can be substantial. A medical expense deduction on your federal income tax return (NJ, however, does not offer a medical expense deduction) may be allowed for special equipment and home improvements if the primary 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 which the cost was incurred. Be sure a physician has recommended the expense as necessary for the treatment of 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-onset 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 40s, 50s, 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 near-normal life expectancies.

Getting Divorced When You’re Old(er)

The divorce rate for Americans over the age of 65 has exploded. Fully one out of every four people experiencing divorce in the United States is 50 or older, and nearly 1 in 10 is 65 or older. More than half of these divorces are of couples in their first marriage. 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 Members 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, offering 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 (732) 863-9900 or email me at fniemann@hnlawfirm.com; it’s my pleasure to assist.

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 the limitations of age and/or illness. As time passes, the opportunity to engage in meaningful life care, estate, and financial planning may be lost. If you’re reluctant to embrace the benefits of the planning process (or for any reason(s)) while you are still cognitively and physically 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; perhaps you or your loved one is already experiencing a loss of physical and cognitive function, changes in or loss of meaningful personal relationships, and more. Coming to terms with the consequences of all these “changes” and moving forward to plan proactively requires that you talk to an experienced elder law and elder care attorney at Hanlon Niemann & Wright. We excel at providing real-world professional guidance to clients because we are known for our trusted experience and thoughtful advice.

So, What Will You Do?

Fredrick P. Niemann Esq.

Aging and end-of-life issues cause strong feelings and emotional responses. They can be complex topics for anyone and their families to address.

It will be my professional honor to provide you and those who love and/or care for you with objective, 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 get in touch with Fredrick P. Niemann, Esq. at (732) 863-9900 or email him at fniemann@hnlawfirm.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