Older Americans are losing $2.9 billion annually to elder financial abuse, a 12 percent increase from the $2.6 billion estimated in 2008, according to “The MetLife Study of Elder Financial Abuse: Crimes of Occasion, Desperation, and Predation Against America’s Elders.”

The study, based on a comprehensive review of news articles on elder financial abuse, found that crimes involving strangers as the perpetrators made up more than half (51 percent) of reported cases of elder financial abuse, followed by crimes involving family, friends, and neighbors as perpetrators (34 percent). By contrast, MetLife’s study two years ago found that family members and caregivers were the culprits in most cases (55 percent). Robberies and crimes classified as “scams perpetrated by strangers” increased from 9 percent to 28 percent from 2008 to 2010. Exploitation from the business sector accounted for 12 percent of reported cases. Medicare and Medicaid fraud made up 4 percent of cases.

According to the study, the most common abuse scenarios involve strangers who target victims out shopping, driving, or managing financial affairs, who often look for particular flags of vulnerability like handicap tags on cars, walking canes, or the display of confusion. Crimes included cons, purse snatchings, and associated physical assaults. In cases involving a person known to the victim, trusted helpers like caretakers, handymen, friends, “sweethearts,” children, lawyers and others seized upon opportunities to forge checks, steal credit cards, pilfer bank accounts, transfer assets, and generally decimate elders’ financial safety nets.

All estate plans should include, at minimum, three  important estate-planning instruments: a durable power of attorney and a will. A trust can also be useful to avoid probate and to manage your estate, both during your life and after you are gone. In addition, medical directives allow you to appoint someone to make medical decisions on your behalf.

 1. Will

A will is a legally binding statement directing who will receive your property at your death. If you do not have a will, the state will determine how your property is distributed. A will also appoints a legal representative (called an executor or a personal representative) to carry out your wishes. A will is especially important if you have minor children, because it allows you to name a guardian for the children. However, a will covers only probate property. Many types of property or forms of ownership pass outside of probate. Jointly owned property, property in trust, life insurance proceed,s and property with a named beneficiary—such as IRAs or 401(k) plans—all pass outside of probate and aren’t covered under a will.

 2. Trust

A trust is a legal arrangement through which one person (or an institution, such as a bank)—called a “trustee”—holds legal title to property for another person, or “beneficiary.” Trusts have one set of beneficiaries during those beneficiaries’ lives and another set—often their children—who begin to benefit only after the first group has died. There are several different reasons for setting up a trust. If you establish a revocable living trust that terminates when you die, any property in the trust passes immediately to the beneficiaries. This can save time and money for the beneficiaries.

 Certain trusts can also result in tax advantages both for the donor and the beneficiary. These could be “credit shelter” or “life insurance” trusts. Other trusts may be used to protect property from creditors or to help the donor qualify for Medicaid. Unlike wills, trusts are private documents, and only those individuals with a direct interest in the trust need know of trust assets and distribution. Provided they are well drafted, another advantage of trusts is their continuing effectiveness, even if the donor dies or becomes incapacitated.

 3. Power of Attorney

A power of attorney allows a person you appoint—your “attorney-in-fact”—to act in your place for financial purposes if and when you ever become incapacitated. In that case, the person you choose will be able to step in and take care of your financial affairs. Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer.

 4. Medical Directives

A medical directive may encompass a number of different documents, including a health-care proxy, a durable power of attorney for health care, a living will, and medical instructions. The exact document or documents will depend on your state’s laws and the choices you make.

Both a health care proxy and a durable power of attorney for health care designate someone you choose to make health-care decisions for you if you are unable to do so yourself. A living will instructs your health care provider to withdraw life support if you are terminally ill or in a vegetative state. A broader medical directive may include the terms of a living will, but will also provide instructions if you are in a less serious state of health but are still unable to make medical decisions yourself.

 5. Beneficiary Designations

Although not necessarily a part of your estate plan, at the same time you create an estate plan, you should make sure your retirement plan beneficiary designations are up to date. If you don’t name a beneficiary, the distribution of benefits may be controlled by state or federal law or according to your particular retirement plan. Some plans automatically distribute money to a spouse or children. Although others may leave it to the retirement plan holder’s estate, this could have negative tax consequences. The only way to control where the money goes is to name a beneficiary.

 Spousal Benefits

Spouses are entitled to benefits if the marriage lasted at least 10 years. A spouse is entitled to an amount equal to one-half of the worker’s full retirement benefit. To receive this benefit, you must be at your full retirement age or caring for a child who is under 16 years old. In addition, your spouse must have filed for Social Security retirement benefits even if he or she isn’t receiving them.

If you could receive more from Social Security based on your own earnings record than through the spousal benefit, the Social Security Administration will automatically provide you with the larger benefit. If you have reached your full retirement age, you may also elect to receive spousal benefits and delay taking your benefits, allowing your own delayed retirement credits to accrue, and switch to your own benefit at a later date. However, you cannot elect to receive spousal benefits below your retirement age and later switch to your own benefits.

If you begin collecting your spousal benefit before your full retirement age, your spousal benefit will be permanently reduced. If your spouse retires early, but you wait until your full retirement age, you will still receive benefits based on one-half of his or her full retirement benefit.

Divorced spouses

An ex-spouse is also entitled to receive one half of the worker’s full retirement benefit as long as the marriage lasted at least 10 years. Unlike a current spouse, a divorced spouse can begin receiving benefits even before the worker has applied for benefits. The worker must be at least 62 years old and the divorce must have been final for at least two years.

Survivor Benefits

If you are a surviving spouse at full retirement age, you are entitled to the worker’s full retirement benefits. If the worker delayed retirement, the survivor’s benefit will be higher. Survivors are entitled to benefits even if they are divorced as long as they had been married for at least 10 years. If you file for benefits before you are over age 60, but below full retirement age, you will receive a reduced percentage of the worker’s benefits. Surviving spouses who are younger than 60 receive benefits only in limited circumstances, such as cases of disability or caring for a disabled child.

After leveling off last year, the cost of adult daycare services went up by 4.5 percent to $70 per day. But the average
cost of home health aides and homemaker/companion service rates remained unchanged at $21 and $19 per hour, respectively.

The survey also reports on the cost of a semi-private room in a nursing home, which also increased 4.4 percent to $214 a day, or $78,110 a year. The cost of a semi-private room in an Alzheimer’s wing rose from an average of $75,190 to $81,030 annually.

Once again, the highest rates for a private nursing home room in 2011 were found in Alaska, where the average cost dropped slightly from $687 a day to $655 a day. The lowest rates were found in Louisiana (with the exception of Baton Rouge and the Shreveport area), at and average of $141 a day. New Jersey averaged $286 to $316 a day.

The cost of assisted living was the highest in the Washington, D.C., area, at $5,757 a month and the lowest in Arkansas (except for Little Rock) at $2,156 a month. In New Jersey, the rates came to $4,622. Average home health care aide services ranged from a high of $34 an hour in Rochester, Minnesota, to $14 and hour in the Shreveport area of Louisana. New Jersey was $21 an hour. Adult daycare services were highest in Vermont at an average of $148 a day and lowest in the Montgomery, Alabama, area, at $29 a day, a $2 drop from 2010. New Jersey fell near the middle at $84 a day.

As more and more people marry more than once, prenuptial agreements have become important estate planning tools. Without a prenuptial agreement, your new spouse may be able to invalidate your existing estate plan. Such agreements are especially helpful if you have children from a previous marriage or important heirlooms that you want to keep on your side of the family.

A prenuptial agreement can be used in a second marriage when both parties have children. For example, suppose you get remarried and both you and your spouse have children from a prior marriage. You want your house to pass to your children, but without proper planning and an agreement in place, your spouse could inherit the house and then pass the house to her children when she dies.

It is important to make sure your prenuptial agreement is valid. Following are the major factors needed to ensure this:

• In writing. To be valid, a prenuptial agreement must be in writing and signed by both spouses. A court will not enforce a verbal agreement.
• No pressure. A prenuptial agreement will be invalid if one spouse is pressured into signing it by the other spouse.
• Reading. Both spouses must read and understand the agreement. If a stack of papers is put in front of one spouse and he or she is asked to sign quickly without reading, the agreement can be invalidated. The spouse must be given time to read the document and consider it before signing it.
• Truthful. Both spouses must fully disclose assets and liabilities. If either spouse lies or omits information about his or her finances, the agreement can be invalidated.
• No invalid provisions. While the spouses can agree to most financial arrangements, a prenuptial agreement that modifies child support obligations is illegal. If an agreement contains an invalid provision, the court can either throw out the entire agreement or strike the invalid provision. Similarly, if the terms of the agreement are grossly unfair to one spouse, the agreement may be invalid.
• Independent counsel. Some states require spouses to seek advice from separate attorneys before signing a prenuptial agreement. Regardless of whether it is required by state law, it is the best way to make sure each spouse’s interest is protected.

Though a prenuptial agreement is signed before marriage, similar agreements can sometimes be made after the wedding (called a post-nuptial agreement). To find out if a pre- or post-nuptial agreement is right for you, feel free to contact us.

A POA allows someone you designate (your “agent” or “attorney-in-fact”) to make decisions for you if you become incapacitated. A health care proxy specifies who will make medical decisions for you. For these documents to be effective, your agents may need to be able to access your medical information.  

However, medical information is private. The Health Insurance Portability and Accountability Act (HIPAA) protects health care privacy and prevents disclosure of health care information to unauthorized people. HIPAA authorizes the release of medical information only to a patient’s “personal representative.” 

HIPAA can be a problem especially if you have a “springing” power of attorney. A springing POA doesn’t go into effect until you become incapacitated. This means your agent doesn’t have any authority until you are declared incompetent, but under HIPAA, the agent won’t be able to get the medical information necessary to determine incompetence until the agent has authority.  

To make sure your agent doesn’t get caught in this “Catch-22,” your POA and health care proxy should contain a HIPAA clause that explains that the agent is also the personal representative for the purposes of health care disclosures under HIPAA. You should also sign separate HIPAA release forms that explain what medical information can be disclosed, who can make the disclosure, and to whom the disclosure can be made.

Medicare fraud occurs when providers mislead Medicare into paying for services it shouldn’t be paying for. Examples of fraud include: a health care provider—such as a doctor or hospital—billing Medicare for services you never received; a supplier charging Medicare for equipment you never got; or someone using your Medicare card to get medical care or supplies.

You can take steps to prevent fraud. 

Ø  Never let anyone use your Medicare number. Be very careful before giving your number out to anyone. Be suspicious of anyone who offers you free medical equipment in exchange for your Medicare number.

Ø  Always check your medical bills, Medicare summary notices, and explanation of benefits for any inaccuracies.

Ø  Understand what Medicare does and does not cover, so you can question a provider who says you can get coverage for something that is not normally covered.

Ø  Only accept services that you need.

Ø  Be suspicious of a provider that advertises free consultations to people with Medicare, uses pressure or scare tactics to sell expensive tests or services, or doesn’t charge copayments without first checking on your ability to pay. 

If you suspect fraud, you should call the Health and Human Services Office of Inspector General’s hotline at 800-HHS-TIPS (1-800-447-8477), or e-mail the Inspector General’s office at HHSTips@oig.hhs.gov.