Long-Term Care Options and Planning in a Nutshell

First, some items to ponder about age demographics in the United States from an article[1] by Thomas Day, Director of the National Care Planning Council:

As if the current lack of planning for long-term care were not a great enough burden on the immediate or extended family, the failure to plan, for the current generation of baby boomers, could be even more devastating on spouse or family in the future. Here is a list of factors that will make long-term care in the future an even more pressing burden than it is today.

  1. We are living longer. The population segment of the “very old”, older than age 85, is the fastest-growing age group in the country. The older the person, the more likely the need for long-term care and the more likely a need for care which lasts not just months but years. Over 50% of the age group over 85 is receiving long-term care.
  2. The older the person the more likely the risk of onset of dementia. The Alzheimer’s Association estimates about 46% of people over the age of 85 have dementia or Alzheimer’s
  3. The number of overweight and obese people in the United States is increasing dramatically. Obesity is a major contributor to disability and poor health in the elderly. Estimates are that the effects of obesity will increase nursing home enrollments by an additional 15% to 20% by the year 2020.
  4. The ranks of the elderly are growing larger. The population of elderly over 65 will double from about 37 million people today to about 77 million people in 2035, 30 years from now. Based on current estimates of the rate of long term care this means that in 30 years about 17 million elderly Americans will be receiving long term care.
  5. It is estimated that 6 out of 10 people will need long term care sometime during their lifetime.
  6. With a large and growing number of single person households there is no spouse and oftentimes no children to provide care. About 40% of the population is single.
  7. The birthrate is going down, families are getting smaller. The combination of fewer children, the increasing number of single person households and a growing number of elderly will eventually create a situation where there are more people needing care than there are available family caregivers.
  8. Out of approximately 116 million women in this country who could be employed in the workforce about 60% or 69 million are employed.  With women being the traditional caregivers, this means only about 40% of traditional caregivers are at home and able to provide long term care for loved ones without having to juggle a work schedule as well.
  9. Children are moving far away or the elderly are relocating after retirement and this makes it difficult or impossible to provide the resulting long-distance caregiving.
  10. The number of elderly as a percent of the population is growing larger putting a burden on the tax base and availability of money for government programs and the availability of younger caregivers. Over the next 50 years the elderly will grow from about 12% of the population to over 20% of the population.
  11. Medical science is preventing early sudden deaths which often results in a prolonged life with impaired health and a higher potential need for long-term care.
  12. Government programs are already stretched thin for long-term care services and will experience even greater stress on available funds in the future.
  13. The government does not seem inclined to provide a national long-term care insurance plan
  14. There is a worldwide trend, in all major industrial countries, to not deal with the problem of long-term care and very few countries, including the United States , have taken the initiative to adequately address the problem.
  15. Most healthy people in their 50s and early 60s prefer to ignore this future problem and their lack of planning will further burden public programs in the future.

(source for statistics: statistical abstract of the United States, 2005) (Emphasis supplied)

Houston, we have a problem–at least most of us do, or will soon. And unfortunately, time is (probably) not on our side. The problem? Long-term care. Such care runs the gamut. Home care, whether by spouse, children, friends, in-home nursing, and the like. Assisted-living facilities. Nursing home care. Combinations of these. Whatever the method, there’s a substantial cost involved, whether it’s an expenditure of time and money caring for a spouse at home—and the possible loss of income that involves—or full on 24/7 nursing home care, which can run as high as $10,000 per month or higher.

There are essentially four ways to pay for long-term care—if it’s needed:

  1. Private or self-pay,
  2. Long-term care insurance,
  3. Medicaid, and
  4. Veteran’s Benefits.

The drawbacks to private or self-pay are obvious: few people have the money to pay $4,000 – $10,000 per month for LTC without depleting retirement funds beyond repair. If family members can pitch in—and they often do—the burden may be bearable.

Long-term care insurance—whether it’s tradition LTCI or life insurance with an LTC rider—can reduce or even eliminate the burden, and if it’s purchased early, the monthly cost can be more manageable than private pay, and better yet, the cost generally comes during the insured’s working years. That said, LTCI can be hard to come by. Many insurers have left the playing field. Nevertheless, if the client is young enough and still healthy, it’s an option worth looking at.

Medicaid can step in the often huge gap between needs and resources, but as I’ve pointed out above, that help comes with some very strong strings attached.

Veteran’s Benefits are for veterans of course and come in two varieties: Service-related benefits and VA Improved Pension. The first is for veterans with service related disabilities, the second is for eligible wartime veterans and is capped. Veterans who qualify should plan on eventually applying for Medicaid.

I Can Help

If you would like to explore these or other ideas further, schedule a virtual meeting with me by clicking on the red button in the lower right-hand corner of this webpage for a free consultation.

[1] https://www.longtermcarelink.net/eldercare/why_long_term_care_planning.htm accessed March, 21, 2019.

Firing Firearms So Firearms Function Properly

So you bought a new firearm? You maybe should read this.

We’re (Wyoming’s) Number 3!

According to WealthManagement.com, that is:

Because Wyoming has no additional estate or income taxes, it’s an ideal place to set up a trust. There are more than 28 trusts per 1,000 households, the eighth most in the study. On average, these trusts have an income of $145,651. Trusts in Wyoming are also able to deduct a large amount of taxes. The average trust in Wyoming has deductions worth $73,100, the fifth-highest amount in our study.

According to Wyoming attorney Amy M. Staehr, Wyoming is actually number 1. A look at the table of contents to her article The Discovered Country: Wyoming’s Primacy as a Trust Situs Jurisdiction, will give you an idea of why she makes that claim (page numbers omitted):

A. Background
B. Ultra Tax Friendly
C. Enhanced Trust Privacy
               1. Court Privacy
               2. Narrower Definitions of Certain Interested Parties
                          a. “Qualified Beneficiary” 
                          b. “Interested Person”
D. Modern Trust Laws 
               1. Statutory Trust Decanting
               2. Trustee’s Insurable Interest 
               3. Tenancy by the Entirety Protection 
                4. Perpetual Noncharitable Purpose Trusts
                5. Premortem Trust Contests
E. Private Family Trust Companies
F. Asset Protection
               1. Wyoming Qualified Spendthrift Trusts 
               2. Discretionary Asset Protection Trusts
               3. Wyoming Limited Liability Companies
                             a. Privacy
                             b. Veil Piercing

So go (set your trust up in) Wyoming!

ATF Says No to Bump Stocks

The ATF released its final rule on Bump Stocks today:

The final rule clarifies that the definition of “machinegun” in the Gun Control Act (GCA) and National Firearms Act (NFA) includes bump-stock-type devices, i.e., devices that allow a semiautomatic firearm to shoot more than one shot with a single pull of the trigger by harnessing the recoil energy of the semiautomatic firearm to which it is affixed so that the trigger resets and continues firing without additional physical manipulation of the trigger by the shooter.

The rule will go into effect 90 days from the date of publication in the Federal Register.

As [name your favorite reporter of talking head] might say, it remains to be seen whether the rule will withstand Supreme Court scrutiny. The argument is that regulations can outrun the underlying statute. In this case, many argue that the ATF (aka The Trump Administration) has done just that. 

Sean Davis at The Federalist does a pretty good job of fleshing out the argument. In summary, he writes,

The new bump stock ban ignores the current statutory definition of a machine gun, creates a new regulatory definition contrary to the existing statutory definition (and contrary to how the U.S. Constitution requires new laws to be passed and enacted), and falsely characterizes how bump stocks work in order to implement a nationwide gun control ban and confiscation regime.

Next, the courts will have their say. Stay tuned.

By the way, I won’t be disappointed when bump stocks are no more (though I think their danger is overstated). However, I am disappointed that the making of the new rule violated the rules of law making. The Trump Administration should be ashamed, the general public should be worried, and Congress should wake up. A few more regulatory moves by this or any other president, and Congress will be a nullity. And that’s bad. 

I hope the courts step in and shout Stop It!

Value Water? Listen to The Water Values Podcast!

In an effort to keep abreast of water, water law, and water rights, I listen regularly to David T. McGimpsey, host of the Water Values Podcast. An attorney with Bigham Greenebaum Doll, David does water law, among other things. In his podcast, he interviews water experts and professionals from all walks of life–engineers, lawyers, hydrologists, water administrators, entrepreneurs, anybody and virtually everybody who does anything with water. I almost always come away from his podcast thinking that was time well spent.

My interest in water law stems from my estate planning and business practice. Water is property and proper estate and business planning ensures that property stays in the right hands over time.

Of course, I’m also interested in water because, as McGimpsey says at the end of every podcast, “Water is our most valuable resource, so please join me by going out into the word and acting like it.” Words to live by.

When We Last Looked in on Prince

As readers of this blog will remember, I posted a short piece about the news that Prince died without a will. To quote from that very brief article:

Something tells me this will neither go smoothly nor end well.

Well, look who’s a genius: Lawyers battle for control of late pop star Prince’s estate.

Veteran entertainment attorney L. Londell McMillan and CNN political commentator Van Jones were close advisers to Prince at different times in his life. Following the reclusive artist’s drug-overdose death in April, the two have ignited a family feud among his six known heirs—a sister and five half-siblings—over issues including the singer’s legacy, a memorial concert and the lawyers’ own conflicts of interest.

. . .

The development comes nearly a year after Prince’s death and offers a window into McMillan’s vision for how best to manage the estate—a view that differs in some respects from that of Jones. (emphasis supplied)

Actually, it doesn’t take much of a genius to see problems in the future when money is at issue–lots of it, in this case. I learned that years ago when I worked as a bank teller for a short time in a management training program I was in. I made a small mistake–25 cents if I recall correctly–when I entered the current balance in the customer’s passbook savings book. You would have thought that I’d just robbed Fort Knox.

Lesson? Be a real prince and have an attorney draft you a will–at least a will. And if you don’t want people peering into your estate through a “window,” have your attorney draft a revocable living trust as well. Unlike with a will (or an estate like Prince’s with no will), what goes on inside a trust is private.

About that Power of Attorney

A power of attorney gives someone else–the agent–the power to act in place of the person granting the power–the principal. A durable power of attorney is a power that continues even after the principal becomes incapacitated, hence the adjective “durable.”

If you or your attorney is drafting a power of attorney in Utah or any other Uniform Power of Attorney Act state, be careful and be very specific; make sure certain grants of power are “expressly” authorized in the document that allows the agent to act in the principal’s behalf.

To wit, Utah Code §75-5-503, signed into law in 2003, says:

A power of attorney may not be construed to grant authority to an attorney-in-fact or agent to perform any of the following, unless expressly authorized in the power of attorney:

(1)  create, modify, or revoke an inter vivos revocable trust created by the principal;

(2)  fund, with the principal’s property, a trust not created by the principal or by a person authorized to create a trust on behalf of the principal;

(3)  make or revoke a gift of the principal’s property, in trust or otherwise; or

(4)  designate or change the designation of beneficiaries to receive any property, benefit, or contract right on the principal’s death. (emphasis supplied)

General, broad language probably won’t do. The grant in these four cases must be express because these four cases present too great an opportunity for abuse. I’ve hedged just a little here because the one Utah Supreme Court case on this point seems to leave the door open, if only slightly, to less express language, language typical of a broad grant of power.

In fact, in analyzing the language of the durable power of attorney at issue in the Burrows case, the Utah Supreme Court talked favorably about both the broad and the express grants of power:

¶ 17 The durable power of attorney expressly granted Ray authority to gift Ida’s personal property. The two-page instrument gives Ray broad authority over Ida’s assets and personal property. It authorizes Ray “ in any and every way and manner [to] deal in and with goods, wares, and merchandise, [choses] in action, and other property in possession or in action, and to make, do, and transact all and every kind of business of what nature or kind soever.”

¶ 18 More specifically, the power of attorney expressly authorizes Ray “ to gift property whether real or personal.” . . .  131 P.3rd 9 (Utah 2008)

If I were arguing this proposition before another court, I would argue like a mother bear that even the broad language does the job according to Burrows. If I were drafting the power, I would make sure the power of attorney expressly authorized each of the four powers outlined in §75-5-503, that is, if my client wanted to give those powers to his agent.

Conservation Easements: Go Big or Go Home

Briefly, creating a conservation easement can allow you to receive good by doing good. Consider creating one on your  property to protect

“natural, scenic, or open space values of [that] real property, assuring its availability for agricultural, forest, recreational or open space use, protecting natural resources, maintaining or enhancing air or water quality, or preserving the historical, architectural, archeological or cultural aspects of real property”

HeartMt_431511_10150848522799638_729014637_12580484_639413481_nand you might receive a variety of tax benefits, including a reduction in property taxes and a charitable deduction that can be carried forward on future tax returns, among other things. For a farmer or rancher, the easement can have the added benefit of ensuring the farm or ranch stays in the family, because, according to G. Bruce Chilcott and Erin Johnson,

“with most or all of the development potential given away in the easement, the next generation doesn’t have the usual incentive to sell or develop [the property] in a residential or commercial manner.” (Long-Term Planning Issues for Farm and Ranch Owners, Wealth Counsel Quarterly)

The steps to create one are outlined in the Utah and Wyoming state codes and are not particularly hard to follow. But, Chilcott and Johnson caution, don’t go the cheap route. Get it done correctly. In particular, they say,

“In creating a conservation easement, the key to achieving the desired tax benefits is the appraisal. This is no place to skimp on costs or quality, and the appraiser must have special qualifications and significant experience in this arena.”

Make sure you choose an appraiser with a good track record regarding farm and ranch appraisals for conservation easement purposes because “the quality of the appraisal can be instrumental in getting the eventual approval of the department of revenue.”

Joint Trust or Individual?

You and your spouse have decided you need to do some estate planning, and you’re finally sitting down with an attorney to do same. He or she starts talking about a will for you and a will for your spouse. A trust for you and a trust for your spouse. And a . . . .

“Wait a minute!” you almost shout. “Two trusts? What’s up with that?”

In brief, here’s what’s up with that.

Community Property StatesFirst, if you live in a community property state and you’re married, the joint trust is almost certainly the way to go, both to preserve the community property character of property contributed to the trust and to take advantage of a 100% step-up in the basis of the property on the death of either spouse. That is, when a spouse dies, property in the hands of the surviving spouse has a basis for tax purposes of the market value of the property at the date of death. For example, suppose the couple bought the property for $100,000 ten years ago. On the day before the death of the first spouse, the property was worth $500,000. If they had sold the property on that day, they would have a capital gain of $400,000, a gain they would have to pay tax on.

Now suppose they didn’t sell and the first spouse died. On the day after that death, the surviving spouse could sell the property for $500,000 and pay no capital gains tax because the basis in the property had “stepped up” to the market value on the date of death–$500,000. Voila!

For separate property states, the question of joint trust vs. individual trust is not so clear. If a married couple has lots of jointly owned property, the joint trust may still be the best choice. May. But if the couple has little jointly held property or if one of them has asset protection concerns–a doctor maybe?–then individual trusts are probably the better choice.

Unmarried couples? Individual trusts all the way because of big gift tax issues caused by no unlimited marital deduction, a deduction available to only married couples.

Image courtesy of Wealth Counsel.



Public Service Announcement: Drones? You need a license for that?

The Federalist Society has a short video up titled, Drone regulation: Commercial v. Recreational use? that you may want to watch, especially if you’re, well, flying drones. It’s short. Just over 2 minutes. Enjoy.

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