Execute a Power of Attorney Before It’s Too Late

A durable power of attorney is an extremely important estate planning tool, even more important than a will in many cases.  This crucial document allows a person you appoint — your “attorney-in-fact” or “agent” — to act in place of you — the “principal” — for financial purposes when and if you ever become incapacitated due to dementia or some other reason.  The agent under the power of attorney can quickly step in and take care of your affairs.

But in order to execute a power of attorney and name an agent to stand in your shoes, you need to have capacity.  Regrettably, many people delay completing this vital estate planning step until it’s too late and they no longer are legally capable of doing it.

What happens then? Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship, the representative must seek court permission to take planning steps that he or she could have implemented immediately under a durable power of attorney with gifting authority.

This is why it’s so important that you have a durable power of attorney in place before the capacity to execute the document is lost.

If you do not have someone you trust to appoint as your agent, it may be more appropriate to have the probate court looking over the shoulder of the person who is handling your affairs through a guardianship or conservatorship.

Because you need a third party to assess capacity and because you need to be certain that the formal legal requirements are followed, it can be risky to prepare and execute legal documents on your own without representation by an attorney. For assistance executing a durable power of attorney before it’s too late, contact the elder law and estate planning attorneys at Costanzo & Russom Law Group, LLC.

How Likely Are You to Need Long-Term Care?

Planning for retirement and deciding whether to buy long-term care insurance would be a lot easier if you knew your odds of needing long-term care, as well as at what age and for how long. Unfortunately, there’s no definite answer. On the other hand, some statistics do provide a bit of guidance.

The Numbers

In 2012, there were about 1.2 million nursing home residents over 65 years old in the United States. Of these, 18 percent were 65 to 74 years old, 32 percent were between 75 and 84, 41 percent were between 85 and 94, and 9 percent were 95 or older. Of course, there are fewer of us in each age cohort, so the likelihood of needing nursing home care rises even more steeply with age than these percentages indicate. While these numbers do not reflect other types of long-term care, the need for home care, assisted living, or care provided by family members probably rises at similar rates.

According to the American Association for Long-Term Care Insurance, in 2012 64 percent of long-term care claims were made by those over age 80 and only 9 percent were from those in their 60s. Meanwhile, according to the association’s figures for 2008, 44 percent nursing home residents stay less than a year, 30 percent stay between one and three years, and only 24 percent spend more than three years in a facility. Updated numbers would likely indicate even shorter stays as more seniors receive care at home or in assisted living facilities. Those who move to nursing homes do so when they are older and sicker, meaning that they stay for a shorter period of time than in the past. According to one reported statistic, only 40 percent of seniors spend any time in a nursing home.

Interpreting the Numbers

So, what do all of these statistics mean in terms of your planning? First, the odds are that you will not need care until you are at least 80 or 85. Second, if you do need nursing home care, there’s a 44 percent chance it will last less than a year (either because you will return home after a period of rehabilitation or you will not survive more than a year) and only a one-in-four chance that your stay will last three or more years. Of course, if it does, your costs will become prohibitive. However, since only 40 percent of seniors spend any time in a nursing home and only a quarter of those stay longer than three years, this means that statistically you have only a one in 10 chance of needing more than three years of nursing home care.

Unfortunately, these statistics are somewhat dated and are just statistics. How do any of us know whether we are part of the 60 percent of seniors who will never enter a nursing home, the 30 percent who will spend less than three years there, or the 10 percent who will spend more than three years? We don’t, but we can modify the statistics based on our own circumstances, especially with respect to certain factors.

Key Factors

Family History: Did your parents live to a ripe old age with no cognitive impairment or become demented at 72, requiring continuing care for another 10 years? While we do not have our parents’ exact genes or live their same lifestyle, there are likely to be some similarities.

Health and Fitness: Do you have any illnesses or conditions that could lead to future impairments or are you in good health and take good care of yourself? Are you overweight or obese, which can lead to illness and disability? Of course, in terms of long-term care, health can cut in both directions. Bad health can lead to the need for care or it can cause an early death, eliminating the need for care. Good physical health can delay the need for care but in the event of cognitive challenges mean that you live a long time with impairments.

Family Situation: If you do need assistance in the future, do you have a spouse, children or other family members who could provide care? Or would you need to pay for it whether at home, in assisted living or in a nursing home?

We have statistics on the need for nursing home care because nursing homes are highly regulated. We know how many people are in them at any one time and how long they stay. We don’t know for sure how many seniors are receiving care at home or in assisted living facilities. But let’s assume for the sake of argument that for every person living in a nursing home, there’s another receiving care at home or in assisted living. Then we can assess the average likelihood of needing care as follows:

No Need for Care  22%

 0 – 1 Year  35%

 1 – 3 Years 24%

 More than 3 Years 19%

Then, you can adjust these numbers up or down based on your health, family history and family situation. For instance, if you are in excellent health, you might add 10 percentage points to the likelihood that you will not need any care, reducing the likelihood of needing 1 to 3 years or more than 3 years of care by 5 percentage points each. If, on the other hand, one of your parents needed a decade of care due to Alzheimer’s disease, you might add 5 percentage points each to the longer levels of care, taking 5 percent off of both the “no need” and the “less than one year” categories. Statistically, men are more likely to receive assistance from their wives, than women from their husbands, in large part because women live longer on average.

While this is far from perfect, by developing your own table you will have a better idea of how to protect yourself and your family’s finances should you require long-term care.  Costanzo & Russom Law Group, LLC can help with this planning, explaining your options and the steps that can be taken now to prevent financial devastation later.

How an Estate Plan Saves You (Yes, You!) Money

People often focus on “how much” it costs to draw up an estate plan. In most cases, it’s more important to understand what it costs when you DON’T have an estate plan in place.

Every adult should have a Last Will and Testament, Power of Attorney, and Living Will in place. Depending on where you live, a consultation with an experienced estate planning attorney and a basic set of documents will probably cost less than $500.

But what will it cost if something happens to you without a plan in place? Here are a few of the “costs” you might not have considered:

  • Without a Last Will and Testament:

    • Your property passes to your intestate heirs. For most people, this is NOT the State. In New Jersey, it’s generally your closest living relatives. This might not be who you want to receive your assets (Do you have a blended family? Estranged child? Prefer to benefit someone else? Want to benefit a charity?);
    • Your next of kin will have to agree on who will administer your Estate. The administrator must be bonded. A bond, in this context, is like an insurance policy that the individual will properly administer the Estate. Bond premiums are based on several factors, including the size of the Estate and the administrator’s credit. Bonds must be renewed while the Estate is open. The bond requirement can be waived in a Will. This alone usually saves your family more money than the cost of a Will;
    • You won’t have nominated guardians for your minor children. The court decides;
    • Minors receive their inheritances outright at eighteen (18).
  • Without a Power of Attorney:

    • Your loved ones must seek court authority to manage your affairs during your lifetime if something happens to you. This process, even when uncontested, typically costs around $5,000 between attorneys fees and court costs. It can take several months to finalize. Court permission/approval is required for many things thereafter;
    • You don’t get to choose who manages your affairs during your lifetime.
  • Without a Living Will:

    • Your loved ones bear the burden of making end-of-life decisions for you;
    • Your decisions for end-of-life treatment aren’t memorialized;
    • You may be subjected to medical treatments that you would rather not endure.

Costanzo & Russom Law Group, LLC can help you put an estate plan in place to protect you and your family from these hidden “costs.” Call (732) 552-0900 to set up an appointment!

Estate planning attorney: The importance of Wills for younger people

The term “estate planning” is an unfortunate misnomer which causes people to think only the wealthy or those with large “estates” need to engage in planning. Another unfortunate misconception is that only the elderly need to engage in estate planning. Estate planning can help everyone save money, make sure they receive proper care, and have their wishes respected by doctors and medical care providers. Estate planning can include setting up a will, power of attorney, and living will. This blog post explores how a will can help a younger person.

How can a will help a young person?

A will is the document that outlines how you wish your estate to be distributed when you pass away. While you may think that you do not have enough money or assets to justify the expense of a will, you are likely mistaken. If you pass away without a will, you are said to die “intestate.” If you do not leave a surviving spouse, this means that your heirs will have to apply to the local Surrogate’s court to have an administrator approved for your estate. Once approved, they will also have to purchase a bond, which functions like an insurance policy guarding against possible nefarious acts by the administrator. The bond must be renewed just like any other insurance policy, adding more expenses and meaning that more of your estate will be spent paying costs to the government and third-party companies instead of your heirs.

If you have a will when you pass away, you can select an executor (the person who will administer your estate) and even waive the requirement that they spend your money purchasing a bond until your estate is fully administered. In many cases, the cost of a simple will is less than the bond alone. Even if the only thing your will does is waive the bond requirement, you will save money which can be passed along to your heirs.

For those with children, a will can be an extremely important tool that allows you to appoint a guardian for minor children in the event both parents pass away and appoint trustees to hold the minor child’s inheritance.

What is the monetary threshold where administration becomes necessary?

If you pass away without a will and are a resident of New Jersey, administration through the Surrogate’s court is necessary when you have $10,000.00 upon your passing. The $10,000.00 threshold is not hard to meet—do you own a car? Have a bank account? Own real estate?  Investments like CDs, stocks, and bonds where a beneficiary is not named? Once the threshold is met, expensive and time-consuming court proceedings will have to be opened to appoint someone to distribute your estate. The cost of a simple will could help your loved ones avoid these expenses and headaches.

There are a number of other reasons that engaging in estate planning and having a will drawn is beneficial for young people. If you would like an estate planning attorney to prepare a will for you, please do not hesitate contact us.