Underestimating the Risk of Disability – The Importance of Being Prepared
No one likes to think about the possibility of their own disability or the disability of a loved one. However, the reality is we are only human and because of that we should all plan for the possibility of a temporary disability. Disability planning is one area where we can give each and every person and family we work with great comfort in knowing that, if they or a loved one becomes disabled, they will be prepared.
The Alzheimer's Factor
Alzheimer's is growing at an alarming rate. Alzheimer's increased by 46.1% as a cause of death between 2000 and 2006, while causes of death from prostate cancer, breast cancer, heart disease and HIV all declined during that same time period.
The 2015 Alzheimer's Association annual report titled, “Alzheimer's Disease Facts and Figures” explores different types of dementia, causes and risk factors, and the cost involved in providing health care, among other areas. This report contains some eye-opening statistics:
- An estimated 5.3 million Americans of all ages have Alzheimer's disease. This figure includes 5.1 million people aged 65 and older and 200,000 individuals under age 65 who have younger-onset Alzheimer's.
- One in nine people age 65 and older (11 percent) has Alzheimer’s disease.
- About one-third of people age 85 and older (32 percent) have Alzheimer’s disease.
- The number of people aged 65 and older with Alzheimer's disease is estimated to reach 7.7 million in 2030 - more than a 50% increase from the 5.1 million aged 65 and older currently affected.
- By 2050, the number of individuals aged 65 and older with Alzheimer's is projected to number between 11 million and 16 million - unless medical breakthroughs identify ways to prevent or more effectively treat the disease.
Caregivers are at risk of developing health problems. There were approximately 10.9 million unpaid caregivers (family members and friends) providing care to persons with Alzheimer's or dementia in 2009. According to the Alzheimer's Association, those persons are at high risk of developing health problems, or worsening existing health issues. For example, family and other unpaid caregivers of people with Alzheimer's or another dementia are more likely than non-caregivers to have high levels of stress hormones, reduced immune function, slow wound healing, new hypertension and new coronary heart disease.
Spouses who are caregivers for the other spouse with Alzheimer's or other dementia are at greater risk for emergency room visits due to their health deteriorating as the result of providing care. A study mentioned in the 2010 Alzheimer's Association report found that caregivers of spouses who were hospitalized for dementia were more likely than caregivers of spouses who were hospitalized for other diseases to die in the following year.
Receiving care. According to the National Nursing Home Survey 2004 Study, the most recent of its kind, the national average length of stay for nursing home residents is 835 days, with over 56% of nursing home residents staying at least one year. Significantly, only 19% are discharged in less than three months. Those residents who were married or living with a partner at the time of admission had a significantly shorter average stay than those who were widowed, divorced or never married. Likewise, those who lived with a family member prior to admission also had a shorter average stay than those who lived alone prior to admission.
Long Term Care Costs Can Be Staggering
Not only will many individuals and families face prolonged long term care, in-home care and nursing home costs continue to rise. According to the Genworth 2015 Cost of Care Survey, Assisted Living, Adult Day Services, and Home Care Costs national averages for long term care costs are as follows:
- Monthly base rate (room and board, two meals per day, housekeeping and personal care assistance) for assisted living care is $43,200 annually, expected to increase .2% annually.
- Daily rate for a private room in a nursing home is $250, or $91,250 annually, expected to increase 4% annually.
- Daily rate for a semi-private room in a nursing home is $220, or $80,300 annually, expected to increase 4% annually.
- Hourly rate for home health aides is $21.50, expected to increase 4% annually.
These costs vary significantly by region, and thus it is critical to know the costs where the individual will receive care. For example, the median annual cost for a private room in the state of California during 2015 was $104,025, whereas the median cost for a year in a semi private room was nearly $90,000.
Most Americans Underestimate the Risk
Perhaps most importantly, despite overwhelming and compelling statistics; most Americans grossly underestimate the risk of disability to themselves and to their loved ones. According to the Council on Disability Awareness 2010 survey:
- 64% of wage earners believe they have a 2% or less chance of being disabled for 3 months or more during their working career; the actual odds for a worker entering the workforce today are closer to 25%.
- Most working Americans estimate that their own chances of experiencing a long term disability are substantially lower than the average worker’s.
Given the high costs of care, this underestimation often leaves Americans ill prepared to pay for the costs of long term care.
Long Term Care Insurance May Cover These Costs
If a parent, their spouse, or family member needs long term care, the cost could easily deplete and/or extinguish the family's hard-earned assets. Alternatively, seniors (or their families) can pay for long term care completely or in part through long term care insurance.
Most long term care insurance plans let the individual choose the amount of the coverage they want, as well as how and where they can use their benefits. A comprehensive plan includes benefits for all levels of care, custodial to skilled. Clients can receive care in a variety of settings, including the person's home, assisted living facilities, adult day care centers or hospice facilities.
Unfortunately, many older Americans will either be medically ineligible for long term care insurance or unable to afford the premiums. In that event, more aggressive planning should be considered as early as possible to make sure life savings are not depleted as a result of having to pay out-of-pocket for care. With the help of an elder law attorney, a plan can be created that will protect much of the assets of an individual or couple that would otherwise be at risk of being depleted.
All Planning Should Thoroughly Address Disability
When a person becomes disabled; he or she is often unable to make personal and/or financial decisions. If the disabled person cannot make these decisions, someone must have the legal authority to do so. Otherwise, the family must apply to the court for appointment of a guardian over the person or property, or both. Those who are old enough to remember the public guardianship proceedings for Groucho Marx recognize the need to avoid a guardianship proceeding if at all possible.
At a minimum, seniors need broad powers of attorney that will allow agents to handle all of their property upon disability, as well as the appointment of a health care surrogate (medical decision maker). Alternatively, a fully funded revocable trust can ensure that the senior's person and property will be cared for as desired, pursuant to the highest duty under the law - that of a trustee.
Everyone, including seniors and their loved ones, should have some sort of planning in place in the event of a possible disability. It is imperative that families work with a team of professional advisors (legal, medical and financial) to ensure that their planning addresses all aspects of a potential disability. Our firm is dedicated to helping seniors and their loved ones work through these issues and implement sound legal planning to address them. If we can help in any way, please contact our office at (407) 574-8125.
To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer's particular circumstances