The Cost of Procrastination
Admit it. We all do it. Procrastination. As I write this, I am, myself, guilty of procrastination – April 15 will be here in about 2 weeks, and I have yet to start putting my tax papers in order. Why? I need to do it. I know I need to do it. But sometimes when I look at the stack of paperwork, it just feels a little overwhelming, and I am not sure where to start. What happens if I don’t get my act together in a timely manner? I am going to end up owing the government more in interest and penalties. This will ultimately move me to act. Next week.
The same procrastination process goes on within families when it comes time to plan for long-term care and the distribution of assets at death. In addition to the process of feeling overwhelmed, there is the added issue that these matters can be hard to discuss for some folks. And then there is the cost of having the plan prepared that concerns others. However, have you ever stopped to think about the costs to you and your family of failing to plan? These costs can be substantial and are often overlooked.
Take the simplest case where a Virginia resident drops dead one day with no warning and with no Will or other estate planning documents in place. What costs are being incurred here? The value of his assets will be subject to a probate tax of approximately 1.33%. This may or may not be a large amount, but there are also fees associated with probate, including the costs of accounting to the Commissioner of Accounts. The person’s entire estate will be probated and distributed in accordance with Virginia’s intestacy laws. Depending on your circumstances, the distribution of your assets under the intestacy rules may lead to an unacceptable result. For example, if our decedent is married and has children from a prior relationship, his current spouse will split the estate with the children from his prior relationship. If he is unmarried (but living with a partner), his assets will go to blood relatives rather than his partner. If a child has special needs and is an intestate heir, the child would receive a share of the estate and possibly lose eligibility for public benefits. These could be very high costs indeed.
However, the simplest case is unlikely to be your reality. The more likely reality is that you and/or your spouse will suffer a period of medical need prior to your death, requiring long-term care and possibly resulting in a period of incapacity. Failing to plan for this reality can be very expensive. By not having advanced medical directives and durable powers of attorney in place, any period of incapacity would result in the need for your family members to go to court to obtain guardianship over your person and conservatorship over your finances. In addition to being time-consuming, the cost of the proceeding can easily run into the thousands.
Furthermore, the costs of long-term care can be quite significant. Long-term care insurance can help defray the costs of long-term care, but not everyone will qualify for insurance or can afford the premiums. (Another cost of procrastination is that the cost of long-term care insurance goes up as you age – the sweet spot is your early-mid sixties.) Medicare only offers temporary assistance with rehabilitative and skilled nursing care and is not likely to be a reasonable pay source for your long-term care needs. Therefore, for many middle-class Americans, Medicaid has become the primary source for payment of long-term care needs. What, then, are the costs of procrastination in planning for long-term care?
Medicaid has both income and resource eligibility requirements. One of the better known resource eligibility rules is that an applicant can have no more than $2,000 in countable resources in his or her name. Although with crisis planning, the attorneys at the Hook Law Center may be able to shelter more assets than that, crisis planning is not as effective as five-year planning. (Why five years? Medicaid has a five-year lookback period for gift transfers.) With five-year planning, we can assist clients to make gifts to trusts that are not countable resources for Medicaid purposes but which still allow the client a level of control over the assets and an ability to use certain assets, like a home, for his or her lifetime. The sooner the asset protection planning is completed, the sooner the five-year clock starts ticking. If the client applies for Medicaid more than five years after the transfer is complete, the transfer does not impose a penalty period that d#1isqualifies him from long-term care Medicaid for a period. So what does that mean for you? For every month that you procrastinate with long-term care planning, you extend the period of time during which you could find yourself in need of Medicaid and may be ineligible because of a transfer. With the average cost of a nursing home in the Tidewater area around $7,000 per month, the difference between planning now and planning in a year could cost $94,000 (or more). When looked at this way, the cost of putting off planning for your long-term care can be quite significant and far exceeds the cost of planning properly. The attorneys at the Hook Law Center are here to have this conversation with you and to start the process of protecting yourself and your family as soon as possible.
Hook Law Center: Kit Kat, what can you tell us about birds that live in the city v. birds who live in the country?
Kit Kat: Well, there is a new study comparing the two, and it has come up with some new findings. In a way, it is not surprising what has been discovered. Now, take these results cautiously, because it was conducted on a small sample of birds from Barbados. The study was led by Jean-Nicolas Audet, a Ph.D. candidate from McGill University in Montreal, Canada. He used 53 bullfinches from different areas of Barbados. Though an island nation, Barbados does have both urban and rural environments.
In a nutshell what he found was ‘…that not only were birds from urbanized areas better at innovative problem-solving tasks than bullfinches from rural environments, but that surprisingly urban birds also had a better immunity than rural birds.’ How could this be? They theorized that necessity is the mother of invention. Rural birds, used to a stable food source in the same places over time, do not have to sharpen their mental skills to survive. Their urban counterparts, however, have to be clever and develop ways to obtain their food—snatch food off plates from humans or get to food that had been placed in objects such as jars or paper bags. This heightened mental capacity in some way also contributes to improved health. They really were not sure why that was true. They did note that rural birds seemed to be less cautious than urban birds about getting food with unknown objects nearby. Again, environment seems to be playing a role. Rural birds do not encounter as many adverse consequences when they scavenge for food, and therefore they are generally less cautious.
As said earlier, the study is small, so don’t conclude that this is true of all urban and rural birds. The author of this particular article was Rachel Feltman of The Washington Post. Her comment about the study is quite insightful—‘…these changes aren’t probably due to long-term natural selection: They’re made on the fly.’ The author of the study himself agrees that the differences found ‘…might all be experience-driven responses to environmental variation in food, human disturbance, and pathogens.’ However, it does show one thing—a bird’s brain may be small, but it certainly is extremely capable and adaptable about meeting the challenges of daily life! (https://www.washingtonpost.com/news/speaking-of-science/wp/2016/03/22/urban-birds-may-be-smarter-than-their-country-sousins)
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