Older Americans Have Strong Reasons to Preserve Their Assets and Income

September 11, 2018 | by the National Care Planning Council

Older Americans control a great deal of the wealth in this country. They are also very interested in protecting what assets they have from loss. In addition seniors want their assets to stretch out as long as possible in order to avoid running out of money well before they die.

Census data substantiate the fact that Americans in the age group of 55 to 74 years old have a higher proportion of wealth per household than the rest of the people in this country.

It is also important to understand that a great deal of the wealth held by elderly Americans is in the form of home equity. Estate preservation strategies strive not only to preserve the wealth of elderly Americans but also to attempt to convert home equity into cash to be used in the final years of life.

We discuss here a few of the reasons why older Americans in their final years of life have a desire to preserve the estate.

Provide Assets and Income for a Surviving Spouse

When one spouse in a couple dies, the income usually reduces with the death. For example, if both spouses are receiving Social Security, only the larger of the two social securities will be retained by the surviving spouse. If John is earning $1,500 a month in Social Security and his wife Mary is earning $900 a month, at John's death Mary will receive $1,500 a month. This may curtail her standard of living since the combined income prior to John's death was $2,400 a month. Sometimes company retirement pension incomes are not shared with the spouse as well and the death of the person receiving the pension results in a termination of that income. Also, a number of pension income plans do not continue at the full amount with the death of a spouse. The most a spouse may receive under one of these plans might be 50% or less of the pre-death amount.

The goal for most couples is to have enough cash equivalent assets to make up for the loss in income. Estate preservation strategies will attempt to protect any remaining cash assets for the surviving spouse from the drain of medical care costs or long term care costs.

Protect Assets and Income from Deterioration or Loss of Property

Unexpected property losses may result in a drain on available cash assets. This might be damage to a vehicle or to the home. Lack of maintenance for both vehicles and the home might also result in expensive repairs. Estate preservation strategies strive to recognize these losses and to provide potential solutions to avoid them or to cover them with adequate insurance coverage. In addition, help can be sought for grants, tax credits and other programs that provide maintenance or savings on utility bills. All of this should be identified as part of an overall strategy.

Maintain Assets to Pay for Medical Care and End-Of-Life

Many older individuals pay out-of-pocket to keep in force Medicare Supplements that provide close to 100% coverage for all costs not covered by traditional Medicare. Oftentimes, these policies can be very expensive and will amount to $5,000 or more a year per person. For those not paying for expensive supplement, medical co-pays and the cost of prescription drugs not covered by insurance can reduce available assets. In addition, costs associated with dying can drain the estate as well. Strategies are designed to identify these costs and to deal with them while assets are still in place to provide protection.

Maintain Assets to Pay for Long Term Care

The need for long term care often occurs at the end of life. Unfortunately, this is the time when assets are already being stretched thin. The cost of home care or assisted living or nursing home care can be very expensive. Assets that have taken a lifetime to accumulate can be wiped out in a matter of months. Strategies are designed to take advantage of government programs to cut down on the burn rate of personal assets when the need for care occurs.

Compensate Children or Grandchildren for Their Sacrifice

It is very common for children or grandchildren to put their own lives on hold and to sacrifice their time and their income to care for loved ones in their final years of life. It is only fitting that any assets remaining should go towards helping family members get back on their feet after the sacrifice of months or years providing care. The government rarely recognizes this sacrifice and any government help does not allow for money to be given to family members for their services. Strategies are designed to have the government pick up a greater share of care in order to provide some assets for family members.

Provide an Inheritance for Children or Grandchildren

Many seniors have worked hard their whole lives to accumulate cash savings, investments and a fully owned personal residence. It does not sit well with these people to have to put out money at the end of their lives for such things as health care, long term care or maintenance. They prefer to have their children have the money. Many of these older people will actually forego medical care or long term care or maintenance on their property in order to leave more money to their children.

It is particularly galling to have to spend down cash savings for long term care at home or in an assisted living or in a nursing home. In many cases, there is no other alternative. Part of a good estate plan is to help those elders who want to leave some money for their children receive necessary services in their final years of life without spending all of their remaining assets.