It’s a truism—no one likes to think about the possibility of their own disability or that of a loved one.
Still, the data show that we should all plan for at least a temporary disability. Let’s examine the eye-opening statistics on disability as well as some of the common disability-planning options.
Study after study confirms that nearly everyone will face at least a temporary disability sometime during their lifetime. For many, the disability will not be short-lived. Over 1.3 million Americans received long-term home health care services during 2000 (the most recent year for which this information is available). Some three-fourths of these patients received skilled care—the highest level of in-home care—and just over half needed help with at least one activity of daily living. The average length of service was 312 days, and 70% of in-home patients were 65 years of age or older.
Nursing home statistics are no less grim. According to the 1999 National Nursing Home Survey, the national average length of stay for nursing home residents is a staggering 892 days, with over 50% of nursing home residents staying at least one year.
Although only a relatively small number (1.56 million) and percentage (4.5%) of the 65+ population lived in nursing homes in 2000, the percentage increases dramatically with age, ranging from 1.1% for people 65-74 years old to 4.7% for people in the 75-84 age bracket, to 18.2% for those who are 85+.
Not only will many of us face prolonged long-term care; keep in mind that in-home care and nursing home costs continue their inexorable upward trajectory. The average cost for a private room in a nursing home is much higher in the Northeast ($126,290 annually in New York City) than in the Midwest ($52,195 annually in Chicago) or, for that matter, in the West ($72,635 annually in Los Angeles).
If you or a family member needs long-term care, its cost could easily deplete your family’s assets. Yet you can pay for long-term care completely or in part through long-term care insurance. Most long-term care insurance plans allow you to choose the amount of the coverage needed; also how and where you can use your benefits. A comprehensive plan includes benefits for all levels of care, custodial to skilled, and you can receive care in many settings, including at home, adult day care centers, assisted living or hospice facilities.
When a person becomes disabled, he or she is often unable to make personal or financial decisions. In the absence of your ability to make these decisions, someone must have the legal authority to do so for you. Otherwise, your family must apply to the court for appointment of a guardian for either your person or your property, or both. It’s best to avoid a guardianship proceeding, as it can be lengthy and painful.
At a minimum, you need broad powers of attorney that will allow agents to handle all of your property if you become disabled, as well as the appointment of a decision-maker for health care decisions. Alternatively, a fully funded revocable trust can ensure that you and your property will be cared for in accordance with your wishes and pursuant to the highest duty under the law—that of a trustee.
The above is a basic outline of the minimum planning you should consider in preparation for a possible disability. It is imperative that you work with your team of professional advisors to ensure that the planning fully addresses your unique goals and objectives as well as all aspects of a potential disability.
For more information, please read:
Planning for Disability | Estate Planning