While the title of this article is ‘Six Costly Mistakes Seniors Make,’ it could be entitled ‘Six Costly Mistakes Anyone Makes.’ Because, no matter your age, mistakes are made. To err is human. No one likes to make mistakes, or, heaven forbid, admit to making them. It’s a sign of weakness. Regardless of if you’re in your mid-30s and in good health, just about to retire, or find yourself on the verge of going into a nursing home, mistakes will be made. They are unintentional mistakes, nonetheless, but mistakes.
Here are the six costly mistakes seniors make:
- Not avoiding probate
- Thinking a will is all they need
- Not protecting life savings from a nursing home
- Not using a Medicaid-knowledgeable attorney
- Getting advice from neighbor, Internet, etc.
Let’s take a closer look at these topics.
Not avoiding probate is a pitfall many individuals find themselves in. To be blunt, probate is not a fun experience, and it’s something you want to do. In legal terms, probate is the procedure by which a deceased person’s estate is distributed to beneficiaries, i.e., family, close friends. Probate occurs in cases where the deceased left a valid will, or no will at all, and it’s done in the courts. Ready for the bad news? With probate, the court system is involved, and attorneys’ fees in probate cases generally run five to 10 percent of the estate’s total value. Think that’s bad? Well, it doesn’t get better. The person’s estate is made public. So if you had a coin collection, a weekend getaway cabin on the lake, or an Aston Martin DB5, everyone will know it because it’s public record! Whatever you have in your estate is public information, and anyone can go to the local courthouse and ask to see what’s in your estate. And the best part (drum roll, please): probate takes about one to two years. Even if you have a will that’s legally solid, six months worth of probate is typical.
There are measures, such as setting up some form of trust, you can take to avoid probate. Financial and estate planners in your area can tell you more about the types of trusts that are available, and what’s best for your particular situation.
Everyone knows the purpose of a will: it’s a personal declaration of your intentions about how to distribute your property at death. But thinking a will is all you need is a misconception. The belief is, if you died having a will, your family will avoid probate court and your assets can be immediately distributed. In reality, it doesn’t work this way. Reread the two paragraphs above to refreshen your memory. All wills must be probated, meaning they must be administered through the local probate court.
You’ve worked hard your entire adult life, and you’ve accumulated a nice savings account and a respectable stock portfolio. First off, congratulations. Now, who do you want to get your money: your family or the nursing home? Of course, you want the family, but without taking the proper steps and not protecting your life savings, you could easily lose it to a nursing home. The average nursing home cost is $6,000 a month, and that figure might be considered conservative and doesn’t include medication or other expenses occurred each month. With that in mind, for someone with a modest saving account, it’s not out unreasonable for someone to go through his or her life savings in a year’s time. But that doesn’t have to be the case if the proper steps are taken now. Again, financial vehicles such as trusts are available that can protect your estate.
Who doesn’t procrastinate? We’re all guilty of it. Who’d want to clean out the gutters or other yard work when it’s too nice of a day not to play golf? But in relation to our subject, procrastinating can be a bad thing. You might have thought about getting a Power of Attorney drawn up, or a living trust created, but just keep putting it off. Well, guess what? Dad suffers a minor stroke and is capacitated. Who’s going to manage his affairs? Dad has said he wants the oldest child to take care of him, but is that in writing? No, well, there’s the problem. Taking the time and having those documents drawn up now will save so much problems down the road.
Now, if you’ve finally decided to have a Power of Attorney or trust created, it’s best you use a Medicaid-knowledgeable attorney. Your next question might be, I’ve had an attorney for years. Can’t he write up what I need? The simple answer is, yes, but before you start dialing his office to schedule an appointment, let’s look at the issue a little more. Doctors and lawyers are alike in many ways. They both go to school for a long time, then, at some point they decide if they want to specialize. There are general practice doctors, cardiologists, dermatologists, etc… It’s the same situation with attorneys. Some attorneys specialize in civil matters, others in corporate law or civil rights laws. An elder law attorney deals specifically with Medicaid and health care issues on a daily basis. He’s aware of the latest changes in the law, attends conferences regularly to get updated on those changes and to network with other elder law attorneys who are doing the exact same thing in other parts of the country.
In this age of instant information, you can log onto the Internet and Google ‘Medicaid’ and get millions of responses. Or someone in your wife’s bunco club had a relative in Colorado who applied for Medicaid, and boy, was it a problem! This type of advice isn’t advisable. Why? Medicaid is a federal program that is jointly funded by the state and federal governments, but is managed by each state. What happened to your wife’s friend’s relative in Colorado may not apply to a case in Indiana, New Mexico or Vermont, because the rules are different in every state! There is no single cookie-cutter situation when it comes to Medicaid; every case is unique. There’s nothing wrong with using the Internet as a resource, a starting place, to get information but remember to take what you read with a grain of salt.
If you haven’t realized it, there is a common thread connecting the six mistakes together. You didn’t notice it? It’s estate planning. Taking the time now to do some estate planning – finding an elder law attorney and certified financial and estate planners, creating a will and/or a trust, appointing a Power of Attorney – now will make life so much simpler for you and your loved ones. If not, you, your estate or your family will be making costly mistakes.