Older Americans should plan to protect assets

January 10, 1993|By Julie Rose | Julie Rose,Los Angeles Times

If you have parents of advanced age, or if you are a senior citizen yourself, the unthinkable should not be the unmentionable.

Families should discuss how to organize their affairs in the event of someone's long-term illness or death. You can save a lot of confusion, pain and loss with a little planning, including arrangements that will protect a parent's financial independence even during a prolonged nursing home stay.

Attorneys and others who specialize in legal and financial questions affecting the elderly say that older people must act in three broad areas in order to prepare.

* Create mechanisms directing how your money and health concerns should be managed if you cannot handle them yourself.

This involves advance directives such as durable powers of attorney or a living will, documents that put someone else in charge if you are incapacitated.

Beware: These papers bestow broad powers and should be given only to your most trusted family member, friend or adviser.

A durable power of attorney for financial management lets a designee handle your routine financial affairs, such as paying bills, and can also cover investments. Financial institutions may balk at accepting the document if it is more than 30 days old, but language that holds the institution harmless in the event of a lawsuit can smooth the way, says Vincent J. Russo, president of the National Academy of Elder Law Attorneys.

* Set up your finances to cope with the possibility of a long-term stay in a nursing home. Most Americans do not pass through a nursing home before they die. But if they do, Medicare does not cover the cost -- $25,000 to $50,000 annually.

Nursing home insurance is designed to pay for long-term care, but it is no panacea. Premiums are high and people tend to drop them after four or five years, before receiving any benefits, according to Harriet Prensky, an elder-law attorney in Mill Valley, Calif.

Ms. Prensky adds that people who need this insurance most -- those over 75, or those with Alzheimer's or Parkinson's disease -- are ineligible.

Instead of writing checks for insurance, financial planner Mary Malgoire of Bethesda recommends that people age 60 or younger self-in sure by setting aside $3,000 a year in a growth investment fund.

Medicaid will pay for long-term nursing home care, but tight restrictions on income exclude the middle-class elderly, so senior citizens must spend down their assets to qualify.

You can become eligible for Medicaid without losing your assets if you transfer savings, securities and life insurance to others at least 30 months before you enter a nursing home.

You can put cash into your house, or into a trust that lets you relinquish control and still get income. Even lacking 30 months, there may be time to arrange things.

* Figure out if you need a will, living trust or other legal instrument to safely pass property on to your heirs while minimizing the tax bite.

One simple step for a married couple is to hold important assets in joint-tenancy.

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