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Confronting the Realities of Planning for Later Life

Helping clients face the facts of growing older.

Many clients create or revisit their estate plans when they’re in their mid-60s. Events in those years can prompt the desire to arrange one’s affairs. Retirement, enrolling in Medicare and qualifying for Social Security all remind our clients that they’re growing older and that they won’t be middle-aged forever. Attorneys and other advisors also need to consider whether their clients are “ready” to enter old age.   

Physical Decline

Your client can’t avoid physical decline, but he can plan for it. First, your client should think seriously about where he lives—both what kind of house or dwelling he lives in and where it’s located. Your client needs to evaluate whether where he lives now will be a good place to live at age 75, 85 or even 95. Riding his John Deere mower around, lugging fertilizer bags and raking leaves may be fine at 65, but will he still want to be doing that at 80? Sure, he can carry that laundry basket down the basement steps today, but will that be a safe thing to do when he’s 85? Our clients need an exit plan for the house that they bought back in the day. They need to start thinking about how to avoid steps, stop shoveling snow, cease maintaining a yard and not be stressed finding repairmen to handle an aging house owned by an aging owner. 

Social Security Benefits

At 62, your client can claim his Social Security retirement benefits. Of course, if he does, he permanently reduces them by 25 percent compared to the amount he would have received at his full retirement age, currently 66. If your client waits until he’s 70 to claim the benefits, the amount rises by 32 percent, at 8 percent for each year he defers. At 70, there’s no reason to delay further because the amount is set for life—except for possible annual cost-of-living increases. For many, deferring claiming Social Security past 66 makes sense.


At 65, your client is eligible for Medicare, but Medicare is a secondary payer for most who are still employed and covered by health insurance. The employer insurance is the primary payer, meaning that it pays first, up to the limits of its coverage; only then does Medicare pay for costs not covered by the primary insurer, if Medicare covers those costs. 

Still, your client should apply for Medicare in the months before he turns 65. It costs nothing to be enrolled in Part A, which pays for hospitalization.

If your client has reached 65 and has retired, it’s time to fully enroll in Medicare. Even if your client’s employer provides a health care plan for retirees, Medicare is the primary payer. The big choice your client faces is whether to stay with original Medicare, Parts A, B and D, or enroll in Medicare Advantage, which supplants Parts A, B and D.

Medigap Policy

In addition to Medicare, your client will need a Medigap policy. Medigap policies—Medicare Supplement Insurance—are sold by private companies but are heavily regulated by federal law. The policies pay some or all of the health care costs that Medicare Parts A and B don’t cover, such as copayments, coinsurance and deductibles. Some Medigap policies also offer coverage for services that original Medicare doesn’t cover, like medical care when your client is traveling outside the United States. Medigap policies don’t cover the cost of long-term care (LTC), dental care, hearing aids, eyeglasses or private duty nursing.

Long Term Care

Medicare pays for acute care, not LTC. Medicare may pay for up to 100 days in a nursing home (with significant copays for days 21 to 100), but that’s it. After that, your client is on his own.

There are generally three ways to pay: (1) LTC insurance; (2) out of your client’s income and savings; and (3) Medicaid.

LTC insurance is expensive and not for everyone.

Paying for LTC out of income and savings is possible, but if your client plans on doing that, he must recognize that the size of his estate when he passes away may become significantly smaller. So, your client needs to create an estate plan that still makes sense, even if his estate diminishes in value. And, while your client may be able to afford paying for himself, that outflow of funds can greatly reduce the income of his spouse. It’s not enough just to have sufficient funds to pay for LTC; your client needs a plan to protect the financial well-being of his healthy spouse. 

Medicaid is a means-tested program; its rules require a recipient to become impoverished to gain benefits. To be eligible, your client must essentially exhaust his savings and devote all his income to the cost of his care before he qualifies. Couples have a little more leeway to retain income and assets to keep the healthy spouse from being destitute.     


This is an abbreviated version of the authors' article in the July issue of Trusts & Estates, "Planning For Later Life."


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