Managing Assets for Aging Baby Boomers and Their Parents

By:
Mira B. Weiss, Esq.
Published Date:
Jun 1, 2015

Benjamin Franklin is famously quoted for saying, “In this world nothing can be said to be certain, except death and taxes.” Now, baby boomers can add a third certainty to that list: the extraordinary cost of long-term care. Although $10,000 seems like a lot of money, that amount will only buy about one month of Medicaid nursing home care or one month of private home care services in New York today; thus, a taxpayer who needs long-term care but doesn’t have an extremely generous long-term care insurance plan will be hard-pressed to survive in New York.

In general, baby boomers (those born in the United States between 1946 and 1964) will find long-term care services unaffordable. It is projected that between 2010 and 2030, the population over age 80 will increase by 79%, and of these individuals, the majority can expect that long-term care services will absorb up to 84% of their discretionary spending. Only a small fraction of the population has coverage for long-term care services through insurance—and even those who do might find the benefits insufficient.

Background

Traditionally, New Yorkers relied on family, neighbors, and community healthcare services to supply long-term care needs. For most individuals, these resources may be nonexistent or unavailable. Families live in diverse geographic areas and frequently don’t have time to devote to caring for relatives; in addition, they might not be able to contribute financially to their care or take time away from work. The corporatization of healthcare and the development of health systems combining hospitals, nursing homes, nursing agencies, and physician practices into an integrated delivery system marks the end of the community-based healthcare that people have always known.

During the 49th Annual Heckerling Institute on Estate Planning in January 2015, Steve Leimberg described the state of tax laws as driving clients away from traditional trusted advisors, such as accountants and attorneys, to a subset of practitioners specializing in estate-planning services and elder law. He postulates that beating the tax system by transferring assets through gift or trust from an estate in order to avoid a step-up in basis and probate no longer drives tax planning. As a result, interest in irrevocable trusts and other sophisticated tax planning devices, products, and instruments will dry up. But where does that leave CPAs and their practice?

Looking to the Future

The future for tax preparers is in incorporating the management of the extraordinary expense of long-term care into their practice. This requires a working knowledge of government benefits—such as Medicaid (which is available to more New Yorkers than is generally recognized), Social Security, Veterans Administration benefits, instruments such as special needs and pooled income trusts, options for funding to “age in place” (i.e., reverse mortgages, life estates, and promissory notes)—and resources, including the expansion of the IRC (section 529A) to allow persons disabled before age 26 to create individual tax-advantaged savings accounts. Even high-net-worth individuals are not immune from the cost of long-term care for themselves, their parents, and their children, and they can benefit from investigating the options for alternative long-term care funding.

Best practice dictates that CPAs look at their client’s estate planning anew: reevaluate a couple’s anticipated long-term care expenses, examine their children’s ability to support them financially (which, by the way, is not a child’s legal obligation in New York), and plan ahead to fund not just inheritance but also long-term care needs.


weiss1Mira B. Weiss, Esq., is the founding partner of the Weiss Law Group, PLLC, a boutique New York City firm devoted to Elder Law/ Special Needs, Trusts and Estates, Health Care Advocacy and Insurance.  Through her experience as counsel to hospitals and insurance companies, Ms. Weiss brings a unique perspective to the burgeoning field of elder law by providing clients with support in matters of estate and elder planning, guardianship, Medicaid and benefits, health insurance and health care advocacy from a position of real world industry knowledge.  Ms. Weiss also  serves as the chair of the New York City Bar Association’s (“NYCBA”) Small Law Firm Committee. She is also a member of the NYCBA Trusts and Estates and Elder Law and Special Needs Sections, the National Academy of Elder Law Attorneys and the National Health Lawyers Association.  She can be reached at mweiss@weisslawgroup.com

 
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