An eldercare attorney discusses how older adults can navigate estate-planning decisions, common misconceptions about long-term care, and why age 75 is a prime time to reassess housing choices.
Our guest on the podcast today is Harry Margolis. Harry has been representing seniors, individuals with special needs, and their families since he started ElderLaw Services, the predecessor of Margolis Bloom & D’Agostino in June 1987. His firm helps clients pay for long-term care, manage the incapacity of a family member, and plan for safe and productive futures for their children and grandchildren. Harry served as editor of the ElderLaw Report, a monthly newsletter for attorneys, for three decades. He has been selected as a fellow of both the National Academy of Elder Law Attorneys and the American College of Trust and Estate Council. He has founded two websites and answers consumer questions online at www.askharry.info. In addition, Harry writes about eldercare issues on his Substack, Risking Old Age in America, also known as okayboomer.substack.com, and has a podcast with the same name.
00:00:00 Margolis’ Path to Elder Law
00:04:15 Aging Clients, Estate Planning, and Long-Term Care
00:08:29 Aging In Place and Medicare Misconceptions
00:15:45 Estate Planning Paperwork and DIY Planners
00:21:26 Power of Attorney Mistakes, Living Wills, and Healthcare Coordination
00:27:06 Caregiving, Money Conversations, and Common Financial Mistakes
00:31:51 Benefits of NORCs
00:34:07 Special Needs Planning: Housing, Trusts, and Expectations
Sally Balch Hurme: Getting Your Affairs in Order as You Get Older
Joy Loverde: Planning Ahead for Care Needs as You Get Older
Beth Pinsker: Lessons From ‘My Mother’s Money’
If you have a comment or a guest idea, please email us at TheLongView@Morningstar.com.
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(Please stay tuned for important disclosure information at the conclusion of this episode.)
Amy Arnott: Hi, and welcome to The Long View. I’m Amy Arnott, portfolio strategist for Morningstar.
Christine Benz: And I’m Christine Benz, director of personal finance and retirement planning for Morningstar.
Arnott: Our guest on the podcast today is Harry Margolis. Harry has been representing seniors, individuals with special needs, and their families since he started ElderLaw Services, the predecessor of Margolis Bloom & Dagostino in June 1987. His firm helps clients pay for long-term care, manage the incapacity of a family member, and plan for safe and productive futures for their children and grandchildren. Harry served as editor of the ElderLaw Report, a monthly newsletter for attorneys, for three decades. He has been selected as a fellow of both the National Academy of Elder Law Attorneys and the American College of Trust and Estate Council. He has founded two websites and answers consumer questions online at www.askharry.info. In addition, Harry writes about eldercare issues on his Substack, Risking Old Age in America, also known as okayboomer.substack.com, and has a podcast with the same name.
Harry, welcome to The Long View.
Harry Margolis: I’m happy to be here.
Arnott: We wanted to start out by talking a little bit about your background. Can you tell us how you first became interested in elder law as a specialty?
Margolis: Wow, that goes back a ways. And it was very much by chance. I was working for a larger law firm in Boston, and at the time, as part of the pro bono commitment, they staffed one position at Greater Boston Elderly Legal Services. And I went over there for what was originally going to be a four-month stint. I found out about elder law when the field was in its infancy. I ended up staying at legal services office for seven months and then going out on my own and hanging a shingle to do elder law.
Benz: What were the aspects of elder law that attracted you in the beginning?
Margolis: So it seemed like a field of law, I think it is, a field of law where we were able to help real people, middle-class people who were facing long-term-care costs, dealing with family members with dementia or other illnesses. And it seemed more like why I went to law school than working again for a larger law firm that had larger clients, whether they were corporations or big litigation matters or in estate planning, generally wealthier people.
Arnott: You have a lot of irons in the fire in addition to your practice. You have a website where you answer questions from people, you host a podcast, you have a newsletter on Substack. How do you manage to find enough time to do all of those things?
Margolis: Delegation helps a lot. And also my career’s transitioning a bit. So I never practiced law full-time. I guess I’ve always been entrepreneurial. So, when I got started, I started a number of publications for lawyers in the field of elder law. So I had a newsletter and a forms manual and a portfolio series all published now by Wolters Kluwer, and they still continue. I’m just not too involved anymore. And then later, I started a couple websites, which also continue and I’m not involved anymore, but one called elderlawanswers.com and the other called specialneedsanswers.com, which was associated with an organization called The Academy of Special Needs Planners. But now I’m transitioning out of actually hands-on practice of law, which gives me more time for writing about estate planning matters for the askharry.info site, but also more on what’s going to happen when aging baby boomers in terms of the coming eldercare crisis, which I do on my Substack, and I talk to people about that in my podcast.
Benz: We want to transition into a discussion about the substance of working with older adults. Can you talk about how working with aging clients differs from traditional estate planning with people who are earlier in their lives?
Margolis: There’s a lot of overlap. A big part of estate planning in general is planning for who will receive your assets when you pass away, but it’s also planning for the potential of incapacity, setting up people who can act for you on financial matters, on legal matters, and making healthcare decisions. All these become more pressing the older you get, because it’s just that much more likely that you’re going to pass away, hopefully not too soon, but somewhat more sooner than later, and it’s much more likely that you’ll become incapacitated. So I think people, when they get into their 60s or beyond, are just more likely to engage in estate planning and think more seriously about it. And the other side of it, especially for people who do elder law, is you begin to think about how are you going to pay for long-term care? And that’s where Medicaid planning sometimes comes in, depending on the financial status of the client.
Arnott: I would imagine that as an attorney specializing in estate planning, you might interface with financial advisors fairly often. Financial advisors often describe their role as a quarterback, and then they work with the estate planner and the tax specialist, etc. What conversations do you think financial advisors need to initiate with their clients that their clients might be reluctant to bring up themselves?
Margolis: I think it really is these questions of potential incapacity. So who’s going to manage your affairs if you can’t anymore? How will they be directed? And then along with incapacity becomes potentially the need for care, and how are you going to pay for that, and what are the potential costs? Because a lot of people have good retirements, and they’re pretty well set to pay whatever they need as long as they don’t have a crisis that happens. And if all of a sudden they’re having to pay for around-the-clock care, this financial plan that was working doesn’t work anymore. Since that could happen to anybody, you have to have some contingency plans in place just in case.
Benz: How can advisors help clients plan for long-term care realistically so that they’re not overinsuring or underinsuring?
Margolis: It’s really a hard one because the need for care is somewhat random. I mean, on a population level, it’s very predictable. We know how many people are going to become incapacitated. We know how long they’re going to need care, how many are going to receive it from their family, and how many are going to have to pay for it out of pocket or qualify for Medicaid. But on an individual level, that’s much more difficult because people’s situations are different, and whether they’re going to need care at all is an unknown, but there are some kind of markers that can guide you. I mean, there’s family history—that can tell you a lot. There’s family situation. Is there somebody there who might help out? Where you live is important. Do you live in a single-family house in the suburbs or in a rural area where people have to drive to take care of you or you need to drive for everything, or do you live in an apartment in a city where things can be done more efficiently?
So I think those can all play into giving people an idea what the costs may be and what they need to have in place. And I think it’s important. I know everybody wants to age in place and stay home, but I think people have to really, as they get older, have to really consider whether that’s the best plan, whether they might be better off moving to some kind of senior housing or an apartment or a condominium where they’ll be able to manage more easily on their own and also where help can be provided more conveniently and more cost-effectively.
Benz: I wanted to ask about that dimension of people aging in place in their homes. Do you think that sometimes clients, people, underrate the nonfinancial aspects of that, of selecting caregivers or selecting a caregiving agency, making sure those people get paid, and then overseeing the whole household running in addition to … They might think about, well, yes, I have the money to pay these caregivers, but do they perhaps underrate the complexity of continuing to keep that household up and running?
Margolis: I think so. I mean, just managing a house is a burden in itself, and there’s always issues. Houses, I think, are beginning to fall apart as soon as they’re built, so you have to keep them maintained, and getting help can be difficult in part because it’s hard to get exactly what you need because you may need somebody to just help you get up in the morning and get going and maybe help you at night with your medications or some kind of wound care or something like that. But if you’re getting home health from an agency, there’s usually a four-hour minimum, which is both very expensive and more than you need. You probably don’t want that person just hanging out in your house, killing time, because you can only hire them for a four-hour minimum. Then that’s through an agency. And then hiring somebody on your own, you have the same issues. If they don’t show up, you got to deal with that. If you’re going to do it right, you have to take out FICA, you have to get workers’ compensation. So these are all very difficult issues and just more burdens, either on you or on your family who’s trying to manage all this.
Arnott: I’m wondering if you have an opinion about continuing-care retirement communities as a housing option, both from the perspective of how well they’ve worked for people that you have worked with as clients, as well as from an estate planning perspective, since they’re usually set up so that you make kind of a large lump-sum payment at the beginning and then your estate gets a certain percentage of that, maybe 80% of that back after you pass away.
Margolis: I think they can be great. I may have a more favorable opinion just because we have some really good ones in the Boston area that provide great service. They provide community, and you kind of know you’re taken care of, and the family knows you’re taking care of if anything happens to you. My in-laws actually lived in one, and they were very well taken care of. So I think they can be really good. And so you may lose 20% of your buy-in and not get the growth in kind of the investment value while you’re there, but that’s just a cost. And if you can afford the cost and get what you need, I think it makes sense. But of course, before you move in, you really need to kick the tires and make sure it’s a community that’s been around for a while and that you be confident that they are going to do what they promise to do and that they will pay the money back when the time comes.
Benz: I’m wondering, Harry, if there are any financial or lifestyle decisions that you’ve found that people most regret not having made earlier and maybe in their 60s while they still had their full independence? What have you experienced?
Margolis: I think it really is taking stock about where they should live as they age. There’s a elder law practitioner out in Washington State named Rajiv Nagaich who has really made a campaign of people taking stock at age 75 and really considering whether they should stay in their home. Because by the time you’re 75, you almost certainly have retired. You got a pretty good fix on your finances. If you have children, they’re probably old enough to be settled somewhere, but you’re also probably still healthy. So you’re able to make a move, whether that’s selling and moving somewhere else in your community or moving perhaps closer to your children. So if you need help, it’d be a lot easier for them to provide it. And I think that makes a lot of sense. I think I like the age 75 time as a time to do it, because, again, things are probably settled in terms of your work and your retirement and your finances, and you’re able to make a decision.
Arnott: What would you recommend in the situation where someone is at age 75, and they really have a strong desire to age in place, but family members disagree with that decision or feel like it’s not the best option for the elder?
Margolis: It’s always your choice, right? It’s your life. You should choose where you want to live, and it’s your finances, how you’re going to pay for it. I just think—just try to be clear-eyed about it. What happens if you fall and break a hip, and you’re in the hospital, and you’re in a skilled nursing facility, and want to come home and need some help, how’s that going to be provided? If your family members don’t live close by, how are they going to help you? And I think the other thing people need to be aware of when they’re making this decision is that sometimes options aren’t available later down the road, that they are available to you when you’re kind of cognitively and physically intact. We’re talking about CCRCs. You have to move into those while you’re still able to manage things so that you can age in place. It’s just a different place. If you wait until the need arises, you probably can’t get in or there’s going to be a long waiting list.
Benz: What are some of the most common misconceptions that older adults have about Medicare, long-term care, health coverage as they age? Can you share some of those things that people are confused about?
Margolis: Yeah. Well, probably the biggest one is that Medicare will take care of everything.
Benz: Right. Long-term care.
Margolis: Right. Yeah. Medicare is really a health insurance program. So it pays for acute health needs. So if you’re hospitalized, if you’re going to the doctor, it’s going to take care of it. It’ll also pay for some post-hospitalization care. So it’ll pay for up to a hundred days in a skilled nursing facility. It will pay for visiting nurses, and occupational therapists, and physical therapists after hospitalization if you’re homebound and can’t get to it yourself. But beyond that, you’re on your own. And so if you have a permanent decline, again, whether it’s cognitive or physical, and you have to move to assisted living or to a nursing home or you need home health, you’re going to have to pay for it yourself, and Medicare won’t pay for it.
Arnott: What about when it comes to estate planning documents? Are there specific documents that are often missing or outdated when families finally need them, in your experience?
Margolis: Well, the most important document and the one that needs to be reviewed periodically is your durable power of attorney. That appoints someone else you trust to make financial and legal decisions for you. And you do need to update it, not as a legal matter, but as a practical matter. A lot of financial institutions won’t honor older durable powers of attorney. They call it a staleness doctrine, which is nowhere in the law, is, what I think, really contrary to law, but what are you going to do if they’re refusing to honor it? So you need to, I think every five years or so, review and renew your durable power of attorney to just make sure it’s fresher and not stale. Also, most financial institutions also have their own durable power of attorney forms for the accounts you have at that institution. And so I would ask them about that and put that into place ahead of time because they’re much more willing to honor their own forms than a general durable power of attorney form that they didn’t draft and didn’t supervise its execution.
Benz: I’m curious, what constitutes stale? I’m reviewing in my head when my husband and I drafted our estate planning documents, and it’s coming up on the 20-year mark, if not a little older than that. So what is stale?
Margolis: I think anything over five years you should consider to be stale.
Arnott: Put that on your to- do list, Christine.
Benz: Oh yikes. It already was, but more urgency.
Margolis: Right. Yeah. I mean, you’re younger, so hopefully it’s not going to matter as much, but yeah, you should still have it in place. And again, as you get older—it’s actually a perverse doctrine because, clearly, someone who has dementia now, five, 10, 20 years ago, they probably didn’t, so it was a valid document, but if they execute a new one when their cognitive ability is failing, well, that’s a much more questionable power of attorney, but banks and other financial institutions are actually going to be more likely to honor it.
Arnott: What about other documents like wills, trusts, beneficiary designations? How often should people be reviewing those, and are there any specific life events that should probably trigger an update?
Margolis: So again, those should all be reviewed more often the older you get, because there are more likely to be changes and they’re more likely to be used sooner. So probably if you’re younger, you probably don’t need to review them all the time. So 10, 20 years is probably fine. I mean, a lot of people do their estate plans when their kids are young, so they have something in place in case something happens to them, and then they don’t review them for 20 or 30 years. And in most cases, that’s fine. But if there’s been a change, if you had grandchildren, you want to include them. If you got divorced, you certainly update your plan. If you hadn’t been married and you get married, you should certainly review your plan at that point. But without any major changes like that, it’s probably fine to go some decades without reviewing your plan and then do it more often as you get older.
I think most estate practices are pretty busy these days because there’s so many baby boomers are now getting to the age where, “Yeah, it’s time. We better take a look at this. ” And they are doing it, at least that’s our experience.
Benz: We wanted to get your thoughts on the do- it-yourself type estate planning, using software tools available on the web or other such tools. Does that sort of DIY estate planning work better for people who have wealth below a certain threshold? How do you think about those tools that someone could employ in an effort to get a cost-effective estate plan?
Margolis: I think it’s a question of both wealth and how complicated your situation is. I believe that the online forms, do- it-yourself forms are good forms. I mean, these are companies who have the resources to hire attorneys to develop good forms, as I said, but they’re all privately held companies, so you don’t really know what’s happening. And I have a suspicion that there are a lot of people who get started on doing these programs and don’t finish because they come up to a question and get waylaid and don’t get back to it. So you have a question of who you’re going to name as your executor or personal representative or your agent on your power of attorney, or who should you name as guardian for your children, or you have a tax question or some property question. And I would be very interested to know how many people start these programs and how many actually finish.
And I think that’s where there could be a real problem because people find it hard to get the answers that they want that can help move them forward. And that’s the issue where you would probably need a lawyer to really make it happen and finish it. But if you can do it and you don’t run into these issues that stop you, by all means, I think use a do- it-yourself program, it’s far better than not having any estate plan in place.
Arnott: What are some of the most common mistakes you see people making when it comes to naming powers of attorney or healthcare proxies?
Margolis: I think the biggest thing is that if they name more than one person, and they don’t agree. So in some states, such as mine in Massachusetts, you can only name one agent on a healthcare proxy, which I think is a good thing because then there’s just really one point person, but you can name any number on a durable power of attorney. I don’t think you should ever name more than two because it just gets too cumbersome. And if you do name two, which I think is most cases is fine, make sure they get along and can work together, because if they don’t, then you may as well not have appointed anybody because it won’t work.
Benz: How can families avoid conflicts if, say, one child is named executor or power of attorney instead of other siblings? How can families head that off?
Margolis: I think the most important thing is transparency, and I think that’s true with who you appoint, any decisions you make that might not be even about how you distribute assets, or how you’ve helped one child rather than another. Because if you explain it and it’s clearly your choice, people may grumble, the kids may grumble, but they have to accept it. If you haven’t explained it, then there can be a lot of suspicions about why you made the choices you made, and that can cause lots of trouble.
Arnott: We also wanted to ask you about living wills, and we talked to someone recently who recommended including an Alzheimer’s provision in the living will. Is that something that you recommend to people you work with?
Margolis: We haven’t. Living wills, at least traditionally, have been really about pulling the plug. So it’s—a healthcare directive would be more broad and have provisions in it about all sorts of care. And so perhaps in that, in a broader healthcare directive, and maybe I’m just being picky about terminology here, I think it could make sense to talk about what kind of care you would like to have if you had cognitive declines, dementia of some kind. We haven’t included that really in our healthcare directives in our office, which are really focused more on medical care, but we do sometimes include that in trusts, in terms of guiding the trustee on how to spend the money. And we seem to end up doing that more in cases where we have single people who don’t have children who feel that they’re going to be more dependent on their trustee, and they really want pretty clear instructions on how to spend the money on their behalf if they become incapacitated.
Benz: Well, speaking of single people or people without big family networks, when is some sort of a professional helper called for, whether to be your POA or in other contexts? Can you talk about that? I understand that that field is really booming because a lot of people are aging more or less solo.
Margolis: Yeah. And I think it’s going to happen more and more. It’s difficult because, again, you don’t have the natural people you would appoint, usually your children, or if you’re married, your spouse, and then your children. And there’s the financial legal side, where if you have a trusted friend, you can name them, or you can name an attorney to handle those issues, or a bank or trust company to be trustee. And you may have some combination, again, a bank or trust company for your trust, an attorney on your power of attorney, or an attorney and a friend on these, so that there’s someone keeping an eye on the professionals.
The most difficult part, I think, for solo agers is who to name on a healthcare proxy because most professionals are uncomfortable with that role. It’s more amorphous. It’s more personal. And it can be very time-consuming, and you don’t want to be paying lawyers’ rates for somebody to be setting up home care for you or something like that. So it’s often hard to find a solution for healthcare agents. And there’s some churches and other religious organizations that provide that service, some nonprofits, some people talk about friendship circles where people do it for each other, but it’s a problem with not always a clear solution.
Benz: I have a friend who is, he’s probably in his mid-70s, who has a concierge-type doctor who he pays an annual fee to. And that individual has said that he would be willing to be the healthcare POA, which I thought was interesting.
Margolis: Yeah, that is interesting and a little complicated. Your agent or attorney, in fact, on your healthcare power of attorney isn’t a person supposed to be directing the doctors. So if the doctor is serving that role themself, and there’s quite a conflict, but it’s a different kind of relationship.
Arnott: I wonder if there are maybe other people in the concierge practice who could do more healthcare coordination. I’m just speculating about how that might work, maybe logistically.
Margolis: Yeah. Or the doctor may figure they’re more the quarterback, and when you need care, there’s specialists who are going to come in and the doctor will still be directing them.
Arnott: Right. So, if you’re an adult child with older parents, when should you start having conversations about finances and caregiving with your parents?
Margolis: So it’s hard. It’s often hard to bring these things up, and especially, I mean, most people are totally capable until they aren’t, and they may not take kindly to a suggestion that they might not be as capable as they used to be, or that they might not be in the future. So every case is different. If there’s more than one child, it probably works best if all the siblings together bring this up. And it could be that the parents just hasn’t been wanting to bring it up themselves because they don’t want to be a burden to their kids. So I think that happens a lot. No one wants to bring it up because they don’t want to step on any toes, but everybody’s waiting for everyone else to do it. So that doesn’t tell you when. But I think 75 is, again, probably a good time to do it.
The kids are old enough to be adults themselves and to have an adult conversation about this. The parents hopefully are still in pretty good shape, but they’re 75, and 10 years later, they might not be in as good shape. So I think we should kind of key in on 75 as the time to do it.
Benz: What are the biggest warning signs that a parent may need help managing money even if they insist that they’re fine?
Margolis: I think there are a few things. I mean, the problem is you might not be aware of these, but if they start skipping paying bills, if they pay bills more than once, if they’ve lost money to some kind of scam—and predators are out there all the time—if they start expressing some confusion about how to deal with something online, or that they did get a call and it’s troubling them. So I think you can tell when people are not quite as in charge as they used to be.
Arnott: So if there are multiple siblings, what’s the best way for them to divide up the caregiving responsibilities if each sibling has a different income, a different location, different schedule? We’ve often heard that the caregiving obligations tend to kind of fall disproportionately on the oldest daughter.
Margolis: Yeah. And I mean, that’s almost inevitably going to happen. I mean, if not the oldest daughter, the closest daughter, unfortunately, it’s more often the daughter, but it may be the closest son as well. So proximity, I think, has a lot to do with who ends up with the greatest burden, and the more everyone else can do to help, the better. I think a full family discussion is always in order of what needs to be done and who can step in, whether that’s the child who’s not living so close, who can take care of the finances, help with the taxes, who might be able to come in and provide some respite care so that the child or children who are close can take some time off.
It’s mostly a matter of communication and being somewhat organized about making a list of what needs to be done. I think the problem is often the child who’s closest just steps in because they have to, and they take care of things without a full discussion with everybody else. And the other people who are far away don’t necessarily know exactly what’s going on, what needs to be done, or how they might help, even though they might be willing to. So full disclosure, open discussion, open communication is what’s needed.
Benz: What are some of the most common financial mistakes that adult children make when they are stepping in to help their aging parents?
Margolis: I think they often don’t have a full picture, and I think it’s hard. Again, people are stepping in and doing what they can to plug the holes in the dike, and it’s really important, this is where financial planners, they can help a lot, is to have a full picture of the finances and start thinking ahead about what the costs might be and how they might be managed. I think that’s the main thing is not looking at the whole picture.
Arnott: We talked a bit earlier about some of the pros and cons of different housing options like aging in place and continuing care retirement communities. Are there any newer approaches to senior living that people might want to look into?
Margolis: Naturally occurring retirement communities, or NORCs, are often apartment buildings where people are aging together in place, and they help each other, and they might have a door person who can help a lot. This happens, I think, a lot in New York City, and I think they’re great. And if you’re thinking about where to move at age 75, this could certainly be an option. The New York Times recently had an article about retirees moving to the city, but I recently toured what looks like a great development. It’s called Opus in Newton, Massachusetts, which is developed by a nonprofit. And it’s aimed at the middle market, the people who don’t qualify for subsidized housing, subsidized senior housing, and can’t afford the more expensive CCRCs. And they developed it with some cost savings in mind. The apartments are probably somewhat smaller than you would get in a luxury development, but with the idea that everybody would volunteer 10 hours a week, everybody who lives there, and provide a lot of the programming on a volunteer basis, which keeps costs down. And it’s independent living, it’s just opened, so everybody’s moved there now is in pretty good shape, but their hope is that with the supports they have in place and will put in place as needed, that they will be able to stay there for the duration no matter what their needs are. And unlike living out in the suburbs where it’d be expensive to hire home healthcare, they have a home health agency in the building. You have to pay privately for the care if you need it, but you can hire just what you need. So again, if that’s just half an hour in the morning, then you can pay at market rates, but for half an hour, and it’s half an hour rather than four hours.
Benz: You referenced special needs planning earlier, and that is an area of focus for you as well. Can you talk about what families who have an adult child or dependent with special needs should be thinking about planning for while the parents are still alive and healthy?
Margolis: The biggest issue is always, where’s the child going to live? So if they live with the parents, especially if they live with the parents now, and a transition is going to have to happen, and whether that’s going to be that they’re going to live with a sibling or move to some kind of supported housing, for them, that’s really, I think, the main issue. And again, probably age 75 is, again, a good time to make some changes and put this in place. And you probably want to have it happen while everybody is still competent and vital, rather than doing it on an emergency basis. So first of all, you can make sure it works, and then if it doesn’t work, you can make some adjustments. The child can make the adjustment while everybody’s around and can support them. So that’s probably the most important thing.
Arnott: Could you talk a bit about special needs trusts and how those can protect eligibility for government benefits, and are there any common misunderstandings about how special needs trusts work?
Margolis: Special needs trusts are trusts that are created for somebody with special needs, and they’re designed so that the funds in the trust will not be counted in determining their eligibility, whether it’s for Medicaid, supplemental security income, subsized housing, but they’re still available to them. And for most people who have children with special needs, these make a lot of sense. If you’re younger and you’re doing this, it’s probably a good idea to think about buying life insurance to fund it, because if you’re younger, you’re probably less likely to have substantial assets to leave. So it’s very important. If you don’t do that and funds go outright to the child with special needs, they may lose their benefits, they may not be able to manage them well, and that’s problematic. Now, it’s possible to set up a trust after the fact, but there are more restrictions on this.
So if you have money of your own and you become disabled or you’re disabled and you receive money, if you’re under the age of 65, you can put into what’s commonly called a D4A trust, or a payback trust, and that’s a special safe harbor in the Medicaid and SSI rules that allows you to fund your own trust, but it has restrictions. And the main ones are that you have to be the only beneficiary. And when you pass away, the trust has to reimburse the Medicaid system for whatever it’s paid out for your care during your life. And that’s true of a trust that’s, we call, self-created or self-funded with your own funds. But if a parent or grandparent sets it up for you, what lawyers call “third-party trust,” it doesn’t have this payback requirement, and it can be much more flexible about perhaps including other beneficiaries in the trust.
Benz: I wanted to go back to the housing dimension of planning for people with special needs. One thing I’ve encountered, and I have a sibling with special needs, is that in some families, there’s a tendency to maybe be overly optimistic about caring for the child throughout his or her life, and maybe the sibling signs on for the obligation of overseeing that care before they’re really aware. It doesn’t seem real, I think, to the young person saying, “Oh yeah, I’ll care for so- and-so,” in their 20s, maybe not married yet. Have you encountered that very much? And how do you get families to be realistic about the amount of care and the duration of care and all of those things?
Margolis: I guess I don’t remember experiencing that so much, but I could certainly see how it happens. I mean, people love their sibling, and they want to take care of them, and they think in their head that they can. In some cases they do, and it works out really well, but it’s a challenge, and lives are very busy these days, and people are pretty stressed with everything else they have. So I imagine what happens is people, that’s their impulse, and then it’s hard to walk it back, if they think about it later, and they feel guilty about that. And how you can make people not feel guilty and that they’re not required to step in like that is a question, I’m not sure if I have an answer to that.
Arnott: And Christine, it seems like you have worked out a good solution with your sisters. I don’t know if you’re OK with talking about that, but …
Benz: Sure. Yeah. We have a big family, which helps. And so there are a lot of people who are helping, and that has helped us. My experience with other families has been, sometimes the parents say proudly, “Oh, so- and-so has said that they will always care for our son or daughter,” but so- and-so, the child, who is saying they’ll step up, they’re pretty young to be signing on for this commitment that might occur like 30 years in the future.
Margolis: Right, definitely.
Benz: So that’s the issue that I’m just afraid some families aren’t being realistic about those decisions, and they’re just too young to be making those decisions.
Margolis: Yeah. I think it can be hard. And it may be the kind of situation where you want a third party involved in the discussion who can bring some kind of reality into it and help let people off the hook if need be.
Arnott: Are there other ways parents can preemptively avoid placing an undue burden on one child when they’re thinking about special needs planning after they’re gone?
Margolis: Well, I think they can by taking the affirmative step of finding the right housing for the child with special needs and setting that up, because I think if that’s done, it relieves a lot of the burden.
Arnott: Well, Harry, thank you so much for joining us today. This has been a really interesting discussion, and I’ve also enjoyed reading your Substack and the questions on your website. There’s really a wealth of great information there.
Margolis: Thank you both very much. I enjoyed it.
Benz: Thank you, Harry.
Arnott: Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts. You can follow me on social media at Amy Arnott on LinkedIn.
Benz: And at Christine Benz on LinkedIn or at @christine_benz on X.
Arnott: George Castady is our engineer for the podcast. Jessica Bebel produces the show notes each week, and Jennifer Gierat copy edits our transcripts. Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at thelongview@morningstar.com. Until next time, thanks for joining us.
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