Category: Incapacity

A Close Look at the Costs for End-of-Life Care

A recent study showed that people in the U.S. fear developing Alzheimer's disease more than any other major life-threatening disease—including cancer, stroke, heart disease and diabetes. It also found if diagnosed with the disease, most have deep concerns about their inability to care for themselves. Burdening others by losing memory of life and loved ones was the second greatest concern, according to the MarketWatch article, “What to know about Alzheimer’s and retirement planning.” 8-29-2016

A survey of about 1,000 adults by Harris Interactive showed that the percentage of people who fear getting Alzheimer's has risen much more since 2006 compared to other diseases. This means it’s critical to properly plan for your retirement years early in case you or a loved one becomes afflicted. Take a look at the breakdown in terms of dollars for care between three common diseases:

  • Cancer: $173,400
  • Heart disease: $175,100
  • Dementia: $278,000

These potential medical expenses must be considered in retirement and estate planning. Some of it can be paid for by insurance, Medicare and Medicaid. However, a large amount needs to be paid out of pocket by the family. In most instances, the total cost of care by family caregivers isn’t included in estimates because much of that time is just "helping out," and there’s no cost figure against this. Similarly, there’s no estimate on the amount of lost income family-care providers would have earned if they weren’t involved in the care giving.

Financial planning often gets delayed, but there are many tasks that should be done to make things easier and to avoid complications down the road. Identify family members who should be included in financial plans, like those who can help with routine financial responsibilities. You also should identify the projected costs of care when it comes to Alzheimer's and dementia because those costs are so high. Review any available government benefits, along with Medicare and long-term care policies.

Reference: MarketWatch (July 7, 2016) “What to know about Alzheimer’s and retirement planning”

Look out: Medicare Changes on the Way!

8-25-2016Can you believe that Social Security’s 60 million-plus beneficiaries are scheduled to get a miniscule 0.2% cost-of-living adjustment next year? In addition, some Medicare recipients could be in line for some steep premium increases, according to the annual trustees reports about the financial health of Social Security and Medicare as reported in AARP.org’s article, “Social Security COLA Projected for 2017.”

The long-term outlook for Social Security old-age and disability benefits is still good, with promised benefits payable until 2034. Without any changes to the law, 79 % of promised benefits will be payable through 2090. However, the trust fund that finances Medicare’s hospital coverage is fully funded until 2028—that’s two years less than projected a year ago.

Social Security annually weighs whether to give beneficiaries a cost-of-living adjustment based on inflation compared to the last year that a cost of living allowance (COLA) was awarded. Beneficiaries didn’t receive a COLA for 2016 because the inflation rate fell, which is the third time since 2010 they didn’t get an increase in payments. The 0.2% COLA that the trustees project for 2017 still could change with inflation. We’ll need to wait for the final word to come in October.

Medicare beneficiaries want to know what will happen to the Part B premium in 2017. With no COLA for 2016, about 70% of Medicare beneficiaries were “held harmless” from cost increases and are paying the same standard premium as they did in the previous three years at $104.90 a month. The remaining folks are required by law to share the load of increased costs; they must pay much more. But Congress came through with a solution that limited the impact of the increases for this year.

The small COLA now projected for 2017 would still have an effect on Part B premiums. Standard premiums for most of those in the 30% not currently held harmless would jump by about $27.00 to $149.00 a month next year. The other 70 % would pay $107.60 a month in 2017, which is $2.70 more than they pay now.

Among the 30% impacted next year are those who didn’t have their premiums deducted from Social Security checks in 2016, including those new to Medicare in 2017, and those who already pay higher premiums because they have higher incomes. The higher-income beneficiaries would see even higher jumps in premiums next year. Those look to increase from $166.30 to $204.40 a month for the lowest affected tax bracket and from $380.20 to $467.20 for those in the highest.

One other group, which includes low-income people whose states pay their Part B premiums, aren’t personally affected. However, their states will face some additional costs.

Part B premiums are to cover 25% of total costs. The federal government will contribute the remaining 75% out of general revenues. The increased income-related premiums are set to cover 35%, 50%, 60% or 80% of the costs, depending on income level. The increase in Medicare costs, which means increases in Part B premiums, is primarily due to the high prices of some recently developed prescription drugs.

“High cost drugs are a major driver of Medicare spending growth,” said Medicare’s acting administrator, Andy Slavitt. “For the second year in a row, the spending growth for prescription drugs dramatically outpaced cost growth for other Medicare services.”

Reference: AARP.org (June 22, 2016) “Social Security COLA Projected for 2017”

Have Control of Your Assets from the Grave!

Estate planning lets you determine how you want your assets distributed upon your death. Not to be morbid, but for those under 40, be advised that dying doesn't just happen to old people. In many instances, young people believe that's the case, which is an impediment to getting this last piece of the financial plan completed. 7-22-2016

As noted in the CBS Boston article, titled "The Boomers' Kids: Estate Planning," if you die without a will, your state laws will provide one for you—and it won't be what you want. The state will dictate the order in which your assets will be distributed. Along the same lines, if you are married with young children and both parents die, then your failure to appoint guardians means the court system will decide this for you.

Your estate plan doesn't need to be fancy, expensive, or complicated. You begin with a will through which you designate an executor/executrix to carry out your wishes and distribute your assets. Again, if you have minor children, you can name a guardian for them. However, appointing a guardian can be done less formally in some states.

Speak with the people you are considering to raise your children. Ask them if they are comfortable with that responsibility. Make certain you understand their values and their patience level.

A durable power of attorney is also needed while you're still alive. This document lets you appoint someone to act on your behalf legally and financially if you're not able to do so.

A health care proxy allows you to choose someone to make medical decisions for you if you are unable to make them. Like those you ask to be your children's guardians, talk to the individual you've asked to be your proxy. Tell them how you feel about death, dying, and life support. This person will need to be the one to carry out your wishes if you cannot do so for yourself.

Reference: CBS Boston (June 3, 2016) "The Boomers' Kids: Estate Planning"

Media Mogul Has Estate Planning Mess

Given that he has a fortune estimated at more than $5 billion, Sumner Redstone could hire the best estate planning help that money could buy. But instead, he bought himself a big mess—regardless of the results of all of the litigation concerning the 93-year-old media mogul. 7-21-2016

The New York Times' article, "In Sumner Redstone Affair, His Decline Upends Estate Planning," explains that a lawsuit brought by Manuela Herzer, one of Redstone's girlfriends, revealed humiliating details about his physical and sexual appetites and his diminishing mental capacity. A medical expert testified that Redstone suffers from dementia that's "toward the severe end of moderate." That case was dismissed last month; however, the testimony about Redstone's mental state will be important in a showdown between Redstone's previously estranged daughter Shari and the man who looked to be his heir apparent, Philippe Dauman. The fate of the Redstone's CBS and Viacom mega-corporations is what's at stake.

Dauman is the CEO of Viacom and was—until last month—Redstone's longtime confidant and a trustee of the trust that controls 80% of National Amusements (his daughter owns the remaining 20 percent), which owns 80% of the voting stock in both CBS and Viacom. People around Redstone now appear to be competing for control—and each one has his or her own objectives, but many of them are attempting to influence decisions related to his estate, the trust and Viacom.

Redstone's problems are a billion-dollar example of what's happening throughout the country. Caregivers, often younger women, are ingratiating themselves into the lives of older men—often beginning as caregivers then becoming romantic suitors. As Americans live longer and more families must cope with late-in-life issues like dementia, the problem is expected to continues getting worse. Seniors are susceptible to the influence of people who happen to be around them during their final days. And this is an issue for many people of even modest wealth.

Regardless the size of their net worth, a good number of those people will consult with estate planning attorneys to create a trust—either revocable (which can be changed later) or irrevocable. A trust anticipates problems and can define what the creator of the trust means by incapacity, which could be a much less rigorous standard than is typically applied by courts. The trust should define the meaning of incapacity and who determines incapacity.

Summer Redstone created this type of trust, but it gives very little control to others as long as he's alive. In addition, it doesn't specifically define incapacity. His lawyers say that his trust is irrevocable, but Redstone is the sole beneficiary as long as he's alive; he has the power to remove or add trustees unless he's incapacitated. But that can only happen if and when he's judged incompetent by a court or by the opinion of three doctors who say that, based on medical evidence, he's not able to manage his affairs in a competent manner.

The critical issue in all of this is who controls the seven-trustee board of his trust: the National Amusements trust will control Redstone's assets, including his dominant stakes in CBS and Viacom, if he dies or is deemed to be incapacitated.

Dauman and his co-trustee filed to have their dismissal deemed invalid on grounds that Shari has isolated her father and is exercising undue influence over him. She denies these claims. Redstone's lawyers filed suit in Los Angeles, seeking a ruling that the trustee changes were valid. His mental capacity is a crucial issue in both lawsuits.

Remember that when you create this type of trust, you should have clear standards and procedures for determining capacity. Different decisions might require different standards for determining capacity, but the real question is does someone have the capacity for the decision at issue?

Redstone could have avoided many of these concerns if he would have created a trust that allowed a majority of trustees to determine that he didn't have the capacity to remove trustees. Many trusts will have a term that's automatically effective when the creator of the trust hits a designated age, such as 75 or 80. However, sometimes no amount of legal advice can save people from their unwillingness to make plans for their own demise and cede control while they're still in full control of their faculties.

Reference: New York Times (June 6, 2016) "In Sumner Redstone Affair, His Decline Upends Estate Planning"