A global economic crisis is upon us. Everyone has been affected by recent events.  These events have been worrisome for most of us, but absolutely terrifying for our fixed income, retired or disabled parents and loved ones. Our elderly have been pushed even closer into financial panic or financial paralysis.  A previously difficult task (planning for long term care and disability), has become almost impossible under this stress.

    It was always surprising that so many of our clients and caretakers came to us knowing very few specifics about their assets.  They are often unsure of what they have, how it is titled, where it is located, what it is worth and whether they can get to it in an emergency.  If they are lucky enough to have good health and if their income covers their expenses (which is often the case because they have great financial discipline) they rarely look underneath the financial hood.  When we itemize what our clients have, they are often surprised by what they really have.    We are always surprised by the financial products hoisted upon them by their so-called "trusted" advisers.

    Too many elderly clients have recently-purchased annuities.  These do not always come from insurance salesmen.  These may be purchased from their bank or their financial adviser or even their accountant.   Our elders see these as "guaranteed" income that is "protected" from nursing home costs and various other threats.  They point to provisions that permit closing the annuity without surrender charges when one is "disabled."  It is not explained to them that this means "disabled" in the mind of a Court of law and not simply in need of care at home or assisted living or nursing home.   The sales agent know that no caretaker will take their loved one to Court to have them declared incapacitated (a quite horrific event for both sides). Therefore, actual waivers of surrender charges rarely happen.

    What does this have to do with the economic crisis?  What recent events have done is to make our elderly even more prone to “magic” fixes such as living trusts and annuities and other scams.  Our elderly are
 even more fearful about looking at their finances since they are afraid to see the decline in value.  They are even more afraid of making a wrong move after it is pointed out that they have already made mistakes. 

    If you are a caretaker, you can assure them of the soundness of the following suggestions.  These were true before this crisis and are true now, namely:

    1.  Make sure you have a Power of Attorney for Assets and for Health Care and make sure they are up to date – and up to date means drafted this year.  Make sure the POA for Assets has provisions for your agent to plan specifically any long term care issue that arises. Make sure it is signed correctly and notarized if you own a home.    Make sure that your health care instructions are up to date under Act 169 in Pennsylvania and that these instructions contain your end of life instructions (living will.)

      2. Have a complete list of your assets and a letter of instruction to your caretakers about where you have your important documents located. I cannot tell you how often that assets are simply "lost" because the caretakers are unaware that they exist.

    3.  Think about simplifying your asset mix.  Our "typical" client has savings bonds, some of which are past maturity, in varying names and with varying beneficiaries.   Many have several insurance policies which more often than not have beneficiaries in them who are no longer alive.  Many have several small bank accounts or numerous layered CDs.  Often clients cannot access their money without paying interest and other penalties.   As previously stated, far too many older individuals have annuities. In the long term care arena, knowing what you have and what it is worth and being able to access it quickly can be the difference between financial survival and financial ruin. Many of our clients chase income without a thought about the devastating effects of a bad health insurance policy that forces a $3000 per month co-pay or the $9,000 per month charges if they run out of Medicare coverage and do not qualify for medical assistance.

    4. Stop gifting money - especially gifts in excess of $500.  These have horrible consequences and may subject caretakers in Pennsylvania to liability for nursing home costs.  Put your money into long term care insurance. 

    5. Forget about trusts or at least understand how the really operate.  It doesn’t matter how many times you hear it on the radio or television, probate is not the problem.  It costs the average estate less than $500 to probate a Will and takes 10 minutes of your time.  A month in a nursing home is $9,000.  You figure out which is more worthy of your planning. 

    6. Have your portfolio and estate plan reviewed by someone who is independent and objective.

    7. Avoid the "do it yourself" mentality.  The law surrounding long term care issues is complex and can only be understood in context of how it is actually implemented in real life. In other words, this area of the law is still developing and what your social worker, financial adviser, banker or friend told you today may not be true tomorrow. You require up to the minute information about how the laws are being interpreted on the front lines - by local officials and by hospitals and nursing home administrators and business offices. You need to know who is liable and how this liability occurs. You need the facts from someone who works with agencies daily.   More than ever you need an advocate.  Armed with the facts, you have far more control over your life than you can imagine.  Nursing homes and the government do not TAKE your money.  Most people give it up without a fight by ignoring the danger. 

    8. Careful about annuities. If you are over 70, please have any annuity purchase reviewed by your legal advisor.  Make sure your annuity conforms to the medical assistance laws in Pennsylvania.   These are complex and evolving.   If you think you will require long term care, be very careful about purchasing an annuity.  If the salesman tells you that the money will be safe he is probably wrong.   Even Immediate annuities, those that start paying monthly income immediately, may not be proper for a potential nursing home or home care applicant if the annuity does not conform to the federal and PA law. 

    So what do our seniors need to do in the recession? They need to do exactly what they needed to do before the recession.