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Why make financial plans?
Costly medical bills, the potential
need for nursing home care, the possibility of dying, the
need to provide security for a surviving spouse are a few
important reasons to get your financial affairs in order.
Just as you may need to choose a health care representative,
you may need someone to make financial decisions for you in
case you become unable to do so yourself. Considering that
your illness is potentially very serious, planning ahead ensures
that you and your family members will be provided for in the
manner of your choosing. (Return to list)
Someone to handle your finances,
just in case
During the course of an illness,
it may become difficult to get to the bank, file taxes, go
to the assessor’s office, or balance the checkbook. Yet
to protect you, most financial institutions will not discuss
your finances with anyone who is not listed on your account.
These circumstances can become a significant problem if you
become homebound or bedridden. To alleviate this quandary,
consider choosing a trustworthy person to be your "durable
power of attorney." Once you have made your choice, legally
all you need to do is fill out a durable power of attorney
form available at any stationary store. Be sure to find out
if it must be notarized to be valid.
Giving someone power of attorney
means that person has the right to make financial decisions
in your place. For this reason, you must choose the person
with care. If you have any doubts about the individual you
have in mind, hold off on making a final decision.
Giving someone power of attorney,
however, does not mean you lose control of your finances.
You can continue to make all decisions and carry out all your
transactions as usual. But if something happens to you and
you become incapacitated, the person who has durable power
of attorney may act in your stead. You have the option of
limiting the person’s rights to managing your banking,
taxes, or specific accounts.
You may also revoke durable
power of attorney at any time. Simply send a written notice
to each of your financial institutions and consultants. (The
word "durable" does not mean "forever."
It simply means that if you become mentally incapacitated,
e.g., from a stroke or Alzheimer’s disease, the person
may continue to make financial decisions for you.) Until a
durable power of attorney is revoked, it remains valid as
long as you are alive. At such point that you pass on, however,
the person serving as your durable power of attorney will
no longer have access to your assets or decision-making rights
regarding your finances.
Some people choose to open a
joint checking account with the trusted person, which is a
less-formal arrangement than durable power of attorney. This
enables the cosigner to write checks after the death has occurred,
which can simplify tasks such as bill paying. This setup does
not allow the person to sign your taxes or conduct other legal
transactions for you. If you decide you want to change the
arrangement, however, it may be a little more difficult to
revoke shared access to a joint account than it would be to
revoke a power of attorney.
A durable power of attorney
can only be granted while the individual who is ill is still
mentally sound. If you have a terminal illness, there will
likely come a time when you will not be able to make decisions
for yourself. Without a durable power of attorney in place,
especially if you are not married and you become mentally
incapacitated, the courts would appoint someone to make financial
decisions for you. This person might be a family member or
even an attorney. You can safeguard your estate against a
court appointment by selecting a durable power of attorney
ahead of time.
If you become mentally incapable
and have no legal spouse and no paperwork in place, the court
will appoint decision makers for you. In general, two types
of decisions must be made—one regarding health and well
being and the other regarding finances. A person appointed
to make decisions in these two areas is called a "guardian."
A person appointed simply to look after the financial side
of things is called a "conservator." To learn more
about power of attorney, guardianships, and conservatorships,
go to the National
Guardianship Association website or talk to an attorney
who specializes in elder law. (Return
to list)
Protecting your assets
The need to protect your partner
is a key reason to get your financial papers in order. You
will want to be sure that your partner is not left high and
dry, especially if you are living with someone without being
married. Inheritance laws do not acknowledge unmarried couples;
thus, you must specifically stipulate your wishes regarding
your house or other assets. This is particularly true for
same-sex partners because surviving family members may not
be aware of the partnership or may be unwilling to respect
the union.
Another consideration for the
seriously ill is whether their medical and other care expenses
will gobble up resources and leave a surviving spouse with
insufficient funds for their own needs. Medicare will pay
for limited time in a nursing home provided 24-hour nursing
care is required. But people who need long-term assistance
and those who need non-medical help such as preparing meals,
doing laundry or remembering medications must pay for this
care out of their own pockets. This can get very expensive!
Medicaid, the federal government’s
program designed for low-income individuals, can be enlisted
to pay for extra-care needs. Many people enter a facility
as private-pay clients and eventually spend their assets to
the point that they qualify for this program. Medicaid then
will cover what Medicare doesn’t. However, choices are
extremely limited when you are on Medicaid. Qualifying for
this low-income program involves specific formulas for countable
assets (bank accounts, stock, property) and exempt assets
(house, car, belongings). If you need to look into Medicaid
as a source of financial assistance, consider talking with
an attorney
specializing in elder law. He or she can advise you
about how to "spend down" and distribute your assets
in such a way that some still remain for your partner.
Long-term care insurance is
an alternative to a spend-down strategy and may help you protect
your assets. This form of insurance is designed to pay for
skilled and unskilled help for a long period of time. Depending
on the terms of your policy, you may receive care in your
home, in an assisted-living setting, in a residential care
setting, or in a nursing home.
Long-term care insurance is
not for everyone, however. It can be very expensive, especially
if you are already ill. Unfortunately, the best time to enroll
in long-term care insurance is while you are relatively healthy.
Age is also a factor. The younger you are, the lower the premiums—but
the longer you will likely be paying them. If you would qualify
for Medicaid within six months to a year of paying for services
on your own, long-term care insurance is generally not considered
a worthwhile investment.
Long-term care insurance typically
has many restrictions. Shop around carefully for a policy
that meets your projected needs. It is not unheard of that
a family has paid premiums for years, only to find that the
particular circumstances of the condition are not covered
by their policy.
To find out more, consider
going to the AARP website and reading their articles
on long-term care insurance. As well,
each state has a State Health Insurance Assistance Program
that can offer tips and advice about the purchase of long-term
care insurance. Contact the federal Eldercare Locator program
toll free at 1-800-677-1116 to find the State Health Insurance
Assistance office closest to you. (Return
to list)
In the event of your death
Everyone over age 18 should
have a document that designates whom they want their assets
to go to in the case of their death. Generally called a will,
such papers also can describe who are to be the guardians
of minor children in your custody. If you do not have a will,
state law will divide your property according to its own formulas.
It will even appoint a guardian for your children if their
other parent is not able to care for them.
To be legal, a will must meet
these requirements:
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