Robert M. Slutsky Associates
Newsletter
Newsletter13: May 2007
April torrential rains bring May flowers. Read on. . .
When to take Social Security Benefits
A spreadsheet at www.analyzenow.com helps you decide whether to take Social Security benefits at age 62 or 65. Plug in certain info and you get a “break even” age for waiting. If you expect to live past the break even age, delay taking benefits until 65 or later.
Unauthorized Practice of Law
A recent decision of the South Carolina Supreme Court brought up an issue that has arisen more and more frequently. In that case an insurance agent used a software package and drafted a will for a client. Ultimately the will was invalidated and the insurance agent was sued for the unauthorized practice of law.
This occurs frequently when hospitals, nursing homes and notaries give out forms for powers of attorney and healthcare directives. If the organization simply provides a statutory from without assistance or guidance that should be OK. If the form is not the one provided in the state law, it will be assumed that the organization is providing legal advice and telling the patient/ resident/ family that this document meets their legal needs. This is the unauthorized practice of law and is a misdemeanor in Pennsylvania.
The Need for Planning (part of series)
One of the greatest fears of older Americans is that they may end up in a nursing home. This not only means a great loss of personal autonomy, but also a tremendous financial price. Depending on location and level of care, nursing homes cost between $35,000 and $150,000 a year. In this area most skilled nursing homes cost $7500.00+ per month.
Most people end up paying for nursing home care out of their savings until they run out. Then they can qualify for Medicaid to pick up the cost. The advantages of paying privately are that you are more likely to gain entrance to a better quality facility and it eliminates or postpones dealing with your state's welfare bureaucracy??an often demeaning and time?consuming process. The disadvantage is that it's expensive and it can wipe out all you worked for.
Careful planning, whether in advance or in response to an unanticipated need for care, can help protect your estate, whether for your spouse or for your children. This can be done by purchasing long-term care insurance or by making sure you receive the benefits to which you are entitled under the Medicare and Medicaid programs. Veterans may also seek benefits from the Veterans Administration.
Medicare Part A covers up to 100 days of "skilled nursing" care per spell of illness. However, the definition of "skilled nursing" and the other conditions for obtaining this coverage are quite stringent, meaning that few nursing home residents receive the full 100 days of coverage. As a result, Medicare pays for only about 9 percent of nursing home care in the United States. Check out the Medicare section of this site for tips on making sure you receive the nursing care benefits to which you are entitled. Medicare will not pay for long term residence in a nursing home.
For all practical purposes, in the United States the only "insurance" plan for long-term institutional care is Medicaid. Lacking access to alternatives such as paying privately or Medicare, most people pay out of their own pockets for long-term care until they become eligible for Medicaid. Although their names are confusingly alike, Medicaid and Medicare are quite different programs. For one thing, all retirees who receive Social Security benefits also receive Medicare as their health insurance. Medicare is an "entitlement" program. Medicaid, on the other hand, is a form of welfare -- or at least that's how it began. So to be eligible for Medicaid, you must become "impoverished" under the program's guidelines.
Also, unlike Medicare, which is totally federal, Medicaid is a joint federal-state program. Each state operates its own Medicaid system, but this system must conform to federal guidelines in order for the state to receive federal money, which pays for about half the state's Medicaid costs. (The state picks up the rest of the tab.)
This complicates matters, since the Medicaid eligibility rules are somewhat different from state to state, and they keep changing. (The states also sometimes have their own names for the program. In Pennsylvania, Medicaid is called Medical Assistance) Both the federal government and most state governments seem to be continually tinkering with the eligibility requirements and restrictions. This has most recently occurred with the passage of the Deficit Reduction Act of 2005 (the DRA) which significantly changed rules governing the treatment of asset transfers and homes of nursing home residents. The implementation of these changes will proceed state-by-state over the next few years.
Those who are not in immediate need of long-term care may have the luxury of distributing or protecting their assets in advance. This way, when they do need long-term care, they will quickly qualify for Medicaid benefits. Giving general rules for so-called "Medicaid planning" is difficult because every client's case is different. Some have more savings or income than others. Some are married, others are single. Some have family support, others do not. Some own their own homes, some rent. Still, a number of basic strategies and tools are typically used in Medicaid planning. In a future Newsletter we will discuss some basics about Medicaid and other things to think about.
Truth about HELOCS
HELOCS are Home Equity Lines of Credit. They act like a credit card and have a variable rate. Home Equity Loans can be fixed. Typically closing costs on HELOCS are paid by the lender, not as often on HE Loans.
HELOCS are better for ongoing expenses as opposed to large one time costs that you want to pay over a long period of time. Never borrow more than 80% of the value of the house as the rate goes up when you exceed that number.
Often HELOCS have inactivity fees or early payoff fees (to reimburse lender for your closing costs and to pay the broker).
Run from HELOCS that have a balloon payment. If you are looking at a balloon mortgage it is likely you are overextended.
Interest Rates and the Housing Market
Rates have stabilized in the low 6% range for a 30 year no point loan. Current rates are only a bit higher than the lowest they have been in 40 years.
The housing market continues to moderate. Prices have dropped more than any time in US history. In this area properties are staying on the market longer and sellers (especially new home builders) are making accommodations to move inventory.
Remember that most Home Equity Lines of Credit have an adjustable rate. Many of the adjustable loans taken out over the last few years are going to adjust soon. This means payment may rise dramatically. Refinancing into a fixed rate mortgage may be advisable at this time.
People who have seen their adjustable rate and negative amortization loans adjust upwards should consider refinancing NOW.
In addition to Elder Law, our firm practices real estate law and originates mortgages. Please call us at (610) 940-0650 with any questions or for rate quotes.
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Robert Slutsky, Esq. has been practicing Elder Law for 14 years. He helps families in Montgomery, Delaware, Philadelphia, Chester and Bucks Counties. Mr. Slutsky has represented local Area Agencies on Aging, long term care facilities and was a member and officer on the CAPS Board of Directors for over 10 years. Home visits are available. You may reach him at (610) 940-0650, robslutsky@comcast.net orthe website at www.slutskyelderlaw.com.
DISCLAIMER: The content of this Newsletter is for general information only. It is not intended to be legal, tax, financial, medical or other advice. The reader should obtain legal, tax, medical or other advice from a competent professional to address his or her specific needs. We do not endorse any particular service provider. If a service provider is mentioned in an article it is simply because we may have come across them in our travels and cannot speak to their quality of service or integrity.
