Health Care Reform
In November 2009 the Senate voted to debate its version of health care legislation, known as the Patient Protection and Affordable Care Act. This promises to be a long debate and there is an uncertain outcome. The House of Representatives has already passed its version, known as the Affordable Health Care for America Act (H.R. 3962). It’s a long and very detailed bill, but the bill was endorsed before passage by AARP, the Leadership Council of Aging Organizations (LCAO), and the American Medical Association, among others. Passage in the House is good news for champions of health care reform, and the endorsements indicate that senior organizations view the bill as a boon for seniors, but a long road still lies ahead. Several provisions, in particular, are of interest to seniors. One is provisions concerning long term care. It would probably be a surprise if any legislation addressed long term care expenses in any meaningful way due to the expense of doing that, but it is hard to see how any legislation which does not address long term care expenses can be considered a really comprehensive reform. Another is changes to Medicare and Medicaid programs. Several versions of these have been considered and it is uncertain what approach will be followed. A last provision is the availability of a “public option.” This is currently available to many seniors in the form of the Medicare program, but it is uncertain what will be available to any younger persons, or whether the availability of this to seniors will change.
Estate Tax Changes
It also appears that at least a one-year extension of current estate tax levels (top rate of 45% and a $3.5 million exemption) is becoming more likely. On Thursday, December 3, 2009, HR 4154, the Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009 passed the House of Representatives by a strictly party line vote (225 Democrats in favor; 200 opposed, including all House Republicans). The party line vote is also probably not a good omen for a smooth passage, either. If 60 votes in the Senate will be necessary to consider it, this might be seen as an indication that it may not get that support. If it doesn’t pass, the existing law, which provides for no estate tax in 2010, but an elimination of “step-up in basis” (a more difficult income tax situation), and a return to 2001 law in 2011, is likely to be one of the worst possible outcomes for most seniors. Stay tuned!
Powers of Attorney: A Life Planning Tool
Many older adults or their families have done little in the way of planning, and in many cases, events just happen and little thought has been given to planning for them. Even routine legal documents like wills and powers of attorney may not have been prepared, and very few have explored eligibility for different types of programs which might help pay for long term care, like Medicaid, VA benefits, or long term insurance. One of the most neglected and least understood planning tools for lifetime needs is the power of attorney. A power of attorney is a basic document which allows someone else to manage your financial matters if you become unable to do so. Powers of attorney are life planning tools, not estate planning tools, since they are directed to helping a person get through the rest of their life and not to distributing property when they pass away. There may well be fewer people with powers of attorney than with wills. A number of problems can occur if you do not have a Power of Attorney
- A house is often in the name of both spouses, and if so, one spouse may be unable to sell the house, mortgage it or do anything with it without both spouses signing all of the documents. This protects both spouses but can interfere dramatically with their ability to do things that may be necessary, when one spouse becomes incompetent through illness, injury or disease.
- One spouse may not be able to use the bank accounts in the name of the other spouse in the absence of a power of attorney.
- A spouse may not be able to change beneficiaries of life insurance policies, IRA’s, or other assets without a Power of Attorney. Financially, without a power of attorney everything just stops, and it is often hard to do anything with assets in the affected spouse’s name. The only alternative to a power of attorney is often conservatorship, a Probate Court process to authorize a representative (often a spouse) to act on behalf of an incapacitated person. However, conservatorship has many disadvantages. It is time-consuming and expensive (I usually tell people to plan for around $3,000.00 to get started). It’s also limited. Many Probate judges authorize conservators only to perform the most basic transactions, whether they are acting for a spouse or not. A power of attorney may be just a start along the road of “Life Planning” but it is often a necessary first step. Even a basic document is almost always far better than nothing.