When planning for retirement, boomers need to consider two scenarios: what happens to their estate when they die, and what happens to the estate if they live but aren’t healthy and need to rely on others for assistance on a permanent basis. 

Creating an estate plan can help protect boomers’ assets and make sure their wishes are played out in the event of death or if they become disabled and need long-term care and support.

David Cutner, partner at Lamson & Cutner, attorneys for the elderly and disabled offered the following tips for both estate planning and long-term care for boomers:

Boomer: Why should I hire an elder law attorney?

Cutner: Most seniors today ignore the greatest financial risk they are facing -- the ruinous costs of long-term care.  According to the U.S. Department of Health, 70% of our population over the age of 65 will need some type of long-term care, and more than 40% will need nursing home care for some period of time. 

Most people don’t have insurance coverage for this risk (note that Medicare doesn’t cover long-term care), and, if care is needed, their life's savings will be rapidly depleted and their homes may end up in jeopardy as well if they need it to finance their costs.

Fortunately, solutions are available to protect assets and income, while accessing long-term care benefits under government programs such as Medicaid.  An elder law attorney will have the knowledge and experience to provide the advice that you need, and will be able to implement proper and reliable strategies to achieve your goals in this area.  It just makes sense at least to have a consultation with an elder law attorney to learn about your options and correct any mistakes you may have made along the way.

Boomer: What makes up a well-designed estate plan?

Cutner: A lot of people worry or wonder about estate taxes, but with the federal exemption now over $5 million, the truth is that only about one-tenth of 1% (0.1%) of estates pays federal estate tax. 

However, having a well-designed estate plan still makes a lot of sense to make sure that your assets are passed on in the most efficient way to your beneficiaries and avoid conflicts among your heirs and to minimize court costs and proceedings (probate or administration). 

At the same time, I believe that a well-designed estate plan must take into account the financial risks of health care that may be needed, especially long-term care. Otherwise, you could wind up with no assets in the estate, and it won't matter how good your estate plan was.  Your Elder Law planning will avoid or minimize these risks, resulting in a larger estate in most cases. The legal documents used to implement your elder law plan (typically one or more trusts) are also your estate planning documents -- they help protect your assets from the ruinous costs of long-term care during your lifetime, and they provide for distribution of those assets according to your wishes at the time of your death. 

Boomer: What are some common long-term care mistakes and how can I avoid them?

Cutner: The list of possible mistakes is a long one:

1) Don't tie up your money in long-term investments where you have no liquidity, or have to pay a penalty to get your money back (e.g., annuities). 

2) If you are considering long-term care insurance, make sure that the benefits are adequate, that you have an inflation rider and that you can afford the premium (including any likely increases in premium over time). You don't want to find that you do not have sufficient cash flows to cover gaps in coverage, and then have to rapidly deplete your assets to supplement your insurance. 

3) Make sure that you have proper and adequate advance directives in place, i.e., power of attorney and health care proxy.  Be aware that "standard forms" downloaded from the Internet may not be valid, or may lack an adequate scope of powers.  The alternative is likely to be an expensive and frustrating guardianship proceeding in court. 

4) Poor management of your real estate, e.g., life estates or reverse mortgages can have unfortunate consequences in some cases. 

5) Failing to take advantage of possible penalty-free transfers when applying for government benefits such as Medicaid, and spending down on private pay home or nursing home care.  Most people believe that they must spend down their life's savings before they can apply for Medicaid, but this is simply not true. 

6) Don't stay in an investment that should be sold to diversify just because you don't want to pay capital gains taxes. Taxes should always be considered but a good investment strategy must consider the risk of staying in one or two investments that could lose value, especially if you may need funds for your long-term care needs.

Boomer: What are the top estate planning mistakes and how can I avoid them?

Cutner: Most mistakes can be avoided, but here’s a look at a few common ones:

1) Failing to plan for liabilities and expenses that can be foreseen -- particularly long-term care. 

2) Failing to update beneficiary designations on bank accounts, investment accounts, retirement accounts, and insurance policies.  Don't just "set it and forget it." 

3) Failing to take steps to avoid conflicts and potential litigation among heirs and family members.  A Trust or Will that makes your intentions clear about excluding, as well as including, certain people as beneficiaries can be very helpful. 

4) Downloading a will from a legal software company online and signing the document without consulting an attorney.  These forms may not comply with the law of your state, and a computer program cannot provide you with proper advice. 

5) Transfers of real estate during lifetime, rather than through wills or trusts, may result in high capital gains taxes that could have been avoided.