The importance of planning By Stella Knight

I have recently written about the importance of planning: making your wishes known to family members and friends. It’s not just about making your will; it’s about planning for unforeseen circumstances during your lifetime. Here’s an example that illustrates the importance of some advance planning.

A few years ago, I was contacted by Rebecca. Her friend, Lillian, had suffered a stroke and was unable to communicate with her doctors, family members, or friends. Although Lillian had 2 children living nearby, they were busy with their families and at a loss as to what to do to assist their mother. After lying in the intensive care unit for several months and then being transferred to a nursing home for rehabilitation, Lillian’s bills were quickly piling up. Her family thought Medicaid would pay for Lillian’s care, but they didn’t know what to do or how to apply for assistance. Soon the creditors started calling and Medicaid denied Lillian’s application for lack of information. How could Lillian have planned and what will happen to this woman?

This is a difficult situation; it will not be resolved quickly. First, when Lillian was capable and competent she would have been wise to execute a durable power of attorney. This is a legal instrument giving another person, whether a family member or a friend, full authority to act on your behalf and deal with your property should you become disabled or need their help. Also, Lillian may have thought it important to have a healthcare power of attorney. This document deals with healthcare decisions and if Lillian was unable to make or communicate her healthcare decisions, she could have given a friend or child the power to make healthcare decisions for her. The practical aspect is that Lillian’s agent could pay her bills, manage her finances, and give insurance information to medical providers. Lillian’s healthcare agent would have been making decisions regarding which nursing home to move her to and talking with her doctors about care treatment plans. But Lillian doesn’t have either power of attorney document and she’s incapable of executing any now, assuming she’s physically and/or mentally incapacitated after her stroke. So what are her options?

A family member or friend will have to petition the Clerk of Court in a guardianship proceeding. Evidence will be heard to determine whether or not Lillian is competent. If Lillian is determined to be incompetent, a guardian will need to be appointed for her. A guardian is a court-appointed fiduciary who will make healthcare and financial decisions for Lillian. The guardian will make healthcare decisions and locate Lillian’s assets and begin to pay her bills and manage her affairs. While I have simplified the process in this article, there is considerable time and expense involved when a guardianship is required. Also, it is necessary for a bond to be posted, which adds time and costs money.

So, assuming Lillian is now being looked after by her guardian, what about paying for her care? First, the guardian may have discovered whether or not Lillian has health insurance and some coverage may be available per the contract. If so, that may only be temporary. What are Lillian’s assets? That may be more difficult to answer, but the guardian will be charged with discovering and recovering her assets.

Many people do not realize that Medicaid only pays as a last resort. If you have assets and can afford to pay for your long-term care, you are responsible for the cost of your care. To simplify, Medicaid does not pay for long-term care unless the individual has less than $2,000 in countable resources and the cost of care is greater than the individual’s income. If the guardian discovers that Lillian has cash or investments worth $10,000 or more, then Lillian will have to pay for her own care. While Lillian’s guardian may benefit from the assistance of an Elder Law attorney to assist in planning for Lillian’s care costs, Lillian is responsible for paying for the cost of her own care. A discussion of Medicaid is beyond the scope of this article.

What can be learned from this example? You are never too young to plan – Lillian was only 59 years young when she suffered her stroke. While it would be nice to think that our children will be there for us in our old age, like we were there for them, that’s not always the case and sometimes we have to look realistically at our children’s strengths and weaknesses. Is my daughter too emotional and unable to deal with stressful situations? Are my sons too busy or irresponsible to assist me when I need them? Is my daughter’s husband really after my money? Would I be better off asking a professional rather than a family member to manage my finances if necessary?

Don’t wait until an emergency occurs before asking yourself these tough questions. This article is just to inform you of some things to consider in your estate planning.

Stella Knight is an attorney licensed in North Carolina and Florida, with a major area of her law practice emphasizing estate planning, probate, trusts, wealth preservation and elder law.

This is a fictitious situation to illustrate the principles discussed. The information contained in this column is of a general nature and does not constitute legal advice. If you have questions, consult with a qualified attorney.