Everybody knows of the problems of aging adults, however few give it the serious attention it needs. The failure to address these issues appropriately can result in serious financial distress and/or a loss of independence. I have outlined five common mistakes made by aging adults and tips on how to avoid making them.
First Mistake: Doing nothing
If you do nothing to deal with aging you have a good chance of lifetime probate. That means the probate court must appoint a guardian or conservator to handle your affairs. One study found that the number one cause of probate guardianship was the need for emergency medical treatment when the patient cannot give consent.
The cost of probate over your lifetime can be enormous and you lose control over your life. It’s like being a child again.
Second Mistake: Only planning for death
Many people think they are “all set” if they have a will. A will is only effective at death. We are talking about lifetime issues, not what happens after we die. For example, in a hospital or a nursing home an empowered advocate can mean the difference between life and death.
Third Mistake: Joint property with children
Many seniors think they are all set if they have a daughter or son on their bank accounts with them. The thinking goes “that way they can pay the bills if I cannot.” There are many problems with joint accounts.
The first is that it solves only one problem of aging: paying bills. Joint accounts give the child no ability to help the parent in any other way. If the child calls the insurance company they will ask “Are you the insured?” The child will say “No. But, I’m joint on the bank account.” That goes nowhere.
The more serious problem is the risk of loss of life savings to a child who has financial bad luck. The same can go for the house. If a child is a joint owner, then if the child is sued, divorced or goes in bankruptcy so does your property.
And finally, joint accounts can be the source of probate battles after the death. What if a parent makes an account joint with one child? After the parent dies, will the child share it with the other children? What if the parent’s will says to share equally? Unfortunately there are no absolute legal rules and questions like these are often answered after a bitter battle in probate court.
Fourth Mistake: Paying employees under the table
People who perform personal services in the home are “employees.” The recipient of the services is the employer, who is responsible for collecting and paying income, social security, Medicare, and unemployment taxes.
Let’s make it personal. Suppose the lady falls down the stairs carrying laundry. She can file for workers’ compensation and have her medical bills and her wage loss paid by the employer – you. If you “let her go” because daughter can now do it, the lady could file for unemployment. And then you start hearing about back taxes, interest, and penalties
Fifth Mistake: Not getting legal advice for “means tested” government benefits
Veterans “Aid and Attendance” and Medicaid nursing home benefits are very valuable to elders. But, they are “means tested.” They have asset and income limits. Few people know that these programs allow some common sense solutions to losing all your life savings before you get your earned benefits. Like the income tax you need to know what “deductions, credits and exemptions” the programs allow. When it comes to these government benefits get legal advice.
Conclusion: It is really easy to do it right
For the average person a “life care” plan is no more difficult than preparing for “death and taxes.” All you have to do is identify your trusted assistants and give them legal authority to do what they will need to do – everything. And then make sure they know when to get professional advice. Do that and you are 99% there to having aging go as smoothly as it can be.
Attorneys in the Estate Planning and Elder Law practice group at Cummings, McClorey, Davis & Acho, P.L.C. are available to answer any questions about the five common mistakes outlined above. We offer compassionate, common sense solutions for seniors worried about the future. Contact Gene Richards at (734) 261-2400 or www.cmda-law.com or firstname.lastname@example.org. To learn more about additional issues impacting elder law, follow our blog at cmdaelderlaw.com.