Estate and longevity planning in retirement is essential to ensure that you, your grown children, and aging parents are legally prepared for the future. Without proper planning, families can face significant challenges. Troy, Michigan estate planning attorney Andrew Byers focuses on estate planning tailored to this stage of life, safeguarding you and your assets.
Congratulations on reaching this milestone! Retirement marks a new chapter, often filled with both excitement and reflection. If you have children, they have probably already left home to start their own families and responsibilities. Perhaps you are helping your elderly parents with their bills, taking them to the grocery store and doctor, or providing other care assistance. Now is an opportune moment to review or establish your estate plan, to suggest to your adult children that they consider estate planning, and to make sure that your parents have all the details of their estate plan implemented and in place. This ensures that everyone involved has their affairs in order, minimizing potential complications down the road. Here are four key considerations to guide your retirement planning:
- Integration of Estate and Retirement Plans: Many couples mistakenly assume that they can make decisions for each other in the event of one spouse's incapacity. However, without proper estate planning, this authority is not automatically granted. Without designated decision-makers already in place through estate planning done in advance, probate court guardianship and conservatorship may be required in order for your spouse or adult children to make medical decisions for you and to have the authority to pay your bills and protect your money. Probate court legal processes can be time-consuming, complex, and costly. Additionally, without a personalized estate plan, the State of Michigan's laws (intestacy) may dictate the distribution of your assets, potentially overlooking your unique circumstances and wishes.
- Reviewing Beneficiary Designations: Protecting inheritances for future generations requires careful consideration of beneficiary designations. Without proper planning, inherited assets can be easily lost to various circumstances including a surviving spouse remarrying and designating their new spouse as the beneficiary of your assets. It is difficult, and in some cases not possible, to plan for contingencies with beneficiary designation. An example would be if you designate person A as beneficiary, but if they do not survive you, where does the asset go? In most cases, to probate. Therefore, it is important to align beneficiary designations with your overall estate plan to avoid unintended consequences.
- Preparing for Life Changes: While contemplating the death of a spouse is difficult, it is essential to plan for such scenarios. Statistics show that remarriage is common among surviving spouses (especially men), which can impact financial matters. If you pass away and your spouse remarries, they may unintentionally disinherit your children by commingling the assets you and your spouse accumulated in joint ownership with the new spouse. Creating premarital agreements and trusts with remarriage provisions as part of retirement planning can protect assets and relationships, ensuring your loved ones are safeguarded and that your savings do not pass to your spouse's next spouse and that person's children.
- Preparing for Long-Term Care: The escalating costs of long-term care, including in-home assistance, assisted living, and nursing homes, can indeed pose a significant financial burden, potentially depleting a lifetime's worth of savings and investments and, for married couples, leaving one spouse impoverished by the other's long-term care costs.
Statistics from the U.S. Department of Health and Human Services indicate a 70% chance of requiring long-term care after the age of 65. Despite this, many people in retirement underestimate their future needs or mistakenly believe that Medicare will cover these expenses. While Medicare may pay for the first 20 days of physical, occupational and speech therapy in a nursing home, and then for part of up to an additional 80 days of such therapy (with a $204 daily copay), Medicare does not cover long-term custodial care, which includes assistance with daily activities like eating, bathing, and dressing. It is this custodial nursing home care that frail elderly individuals and those with dementia often require. Therefore, it is imperative to plan ahead in retirement, considering the potential need for long-term care to maintain one's independence and dignity, without imposing the responsibility of care solely on family members. Estate and longevity planning, including the consideration of the costs of long-term care in that it is essential to ensure that adequate funds are available to cover such care if needed. There are five ways to deal with long-term care in Michigan:
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- Be healthy enough to never need it or to only need long-term care for a brief period of time.
- Have sufficient savings to pay for it. In Metro Detroit:
- home care tends to cost about $40 per hour with two-to-four-hour minimum requirements.
- Assisted living costs start at around $4,000 per month and can be as much as $9,000 for those with dementia.
- The statewide average cost of a nursing home in Michigan is $10,870 per month. In Oakland County, Michigan and the rest of Detroit, it tends to be $12,000 per month.
- Long-term care insurance can help cover expenses, preserving your savings and investments. Unfortunately, few of today's seniors have long-term care insurance due to the high cost and the decreasing number of companies that offer it. Such policies vary, with some providing benefits only if long-term care is needed (like auto accident insurance), while others offer more versatile plans that convert into life insurance if the long-term care benefits remain unused. This flexibility makes them an attractive option compared to traditional long-term care insurance.
- Qualify for Medicaid. In Michigan, Medicaid has two programs that pay for long-term care in the community, including some home care. However, there is a $2,829 monthly income limit for both programs and asset limits. Michigan's Medicaid nursing home program pays for the long-term custodial nursing home care that Medicare does not. Michigan's Medicaid program also has asset limits, but once a nursing home resident qualifies for Medicaid by spending down to the $2,000.00 countable asset limit or legally restructuring their assets in compliance with Michigan's Medicaid nursing home laws, Medicaid will pay for the nursing home (less a co-pay from the person's income)
- Preplan for Medicaid eligibility. Married couples can create a revocable trust that at the time when the first spouse died, leaves assets in a Medicaid protected trust for the surviving spouse. I refer to this as the estate and longevity trust. The assets are available for the surviving spouse's needs, but do not have to be spent down to $2,000 before the surviving spouse can qualify for Medicaid if they need long-term care. This trust is authorized in the federal and Michigan's Medicaid laws. This trust also deals with the remarriage issues noted above. Another type of trust that can be made in advance of needing long-term care, is the Medicaid Asset Protection Trust (MAPT). While this trust is also authorized by federal and state law, it requires five years to pass between transferring the assets to be protected to the trust before applying for Medicaid. Certain aspects of the MAPT must also be irrevocable, meaning you cannot change parts of it. Nonetheless, they are an effective long-term care asset protection trust.
As you plan for retirement, it is vital to consider the potential need for long-term care.
Help with Estate Planning in Retirement in Troy, Michigan
I am an estate and elder law attorney with 27 years of practical experience you can use to your benefit with the issues of estate and longevity planning in retirement noted above. Contact me, Andrew Byers, now by using the online form or calling me directly at (248) 469-4261. On this initial call, I will answer your preliminary questions and get some background information to make sure it is a situation I can help with. After that, you can decide if it makes sense to schedule a more in-depth consultation. I advise clients in Troy, Michigan and surrounding areas including Royal Oak, Clawson, and the rest of Metro Detroit.
