In a recent conversation with friend and financial advisor Rocky Greene, the subject turned to the lowered level of trust people are willing to extend to financial professionals in recent days, because so many people have lost their investments—sometimes their entire retirement or life savings—in the stock market.  After being betrayed by the heads of Fannie Mae, Freddie Mac, major investment houses, and even the governor of Illinois, people are afraid to trust, and afraid to invest again.  This fear of professionals is not making people safer—it is actually making individuals even more vulnerable to ongoing losses that can devastate their accounts.

At times like these, when people are in a state of fear, they put a complete stop on any forward movement because they’re afraid of the unknown.  According to Rocky, freezing up is the worst thing you can do.  He uses the following analogy, “if your child is sick, you don’t wait until your child turns blue to go to the doctor.  You take your child to the doctor right away!  If you’re not satisfied with the opinion of that doctor, then you get a second opinion.  But you need to do something.”  Investment management is not so different from child management. 

Despite the losses in today’s market, people are at much greater risk if they are paralyzed with fear.  Don’t freeze up; instead, use this time to take action!  If you don’t trust your financial advisor any more, find someone you DO like and trust, who can assist you in moving forward.  And whatever you do, do not pay attention to the pundits on TV.  Those “professionals” are promoting the flavor of the month, trying to push people’s hot buttons to get ratings.  This is absolutely  the opposite of working with a professional who will endeavor to understand your concerns and priorities and guide you accordingly.  Change is not nearly as fearsome as you might believe—provided you have a trustworthy guide. 

So I asked Rocky, “Well, how can people know who to call?  What should a client look for in an advisor?”  His advice was simple: ask around and interview until you find someone you feel you can trust.  I admit that this particular advice can be somewhat challenging, especially when you have the specter of someone like Bernie Madaff, who made off with over $50 billion entrusted to him by individuals who are far savvier than the typical senior citizen in America.  But Rocky’s advice makes sense.  In the end, we all have to trust our instincts and just keep moving.

(In case you are wondering, Rocky Greene is not a slick new kid on the block; he is one of the old guard.  He does not have a website; in fact, almost all of his business comes from referrals.  Rocky is educated about the particular concerns of senior citizens as well; he is quite aware that elderly clients need to be able to have access to their money in the event of an emergency, and he states that there are appropriate products that do provide seniors with liquidity in the event of a nursing home or long-term care emergency.  Rocky can be reached at Greene Financial Services in Naperville, IL, e-mail rockyg@wideopenwest.com)

 During the year we get referrals from a number of financial advisors.  During 2008 I had the pleasure of working with Rocky Greene as he held the hand of one of his clients who was beginning to slip into the early stages of dementia.  Because of his proactive concern for his clients and at great expense of time, he worked with his clients (a husband and wife in their 70’s) and their adult children in helping them to modify their existing estate plan into a long-term care plan with asset preservation for the healthy spouse and appropriate distributions for the children at the time of the death of both of the spouses.  I decided to give Rocky a call to ask him what was going on in the financial investment world from his perspective.  What follows are some of the things that he had to say.

There are four crucial areas of investment management, all of which need to be addressed to have a truly healthy financial plan for the future:

Level of Risk.  When someone asks Rocky about investment management, he counters by asking them a question right back: How you are going to manage your money, not only in an up market, but also in a down market, or in a sideways market?  The key to getting the most out of your investments is not by blindly following your financial advisor, but by doing what is right for you.  The key to good investment management is communication.  Individuals need to be able to share with their financial manager what level of risk they are willing to tolerate.  Some will be comfortable playing the market and hoping they’ll win big.  But for those who insist upon guarantees, an annuity may be the best choice available to them. 

Proper Insurance Planning.  No matter what your level of risk, investment management also includes the having proper insurance for any of life’s risks.  This includes not only the obvious, life insurance, but also the less obvious: long-term care insurance, and appropriate liability insurance in the event that you are sued. 

Estate Planning.  It is absolutely critical that you put together a proper estate plan so that your inheritance goals will be properly structured in writing, not only from a tax standpoint but also to determine who is in charge.  Every person, regardless of the size of his or her estate, needs to take the time to put together a plan with directions to loved ones, detailing not only what should be done, but what should not be done with the worldly assets that are left behind. 

Medicaid/Public Benefits Planning.  Lastly, Rocky believes that Medicaid/public benefits planning is essential!  In today’s environment, even a $2 million net worth individual or couple can have their life savings completely destroyed by failure to properly plan for long-term care.  These days, when you have the very real possibility of one or both individuals needing long-term care for 8 to 12 years, it is easy to take an estate from $2 million or more to absolute zero in that period of time.  To avoid this, you need more than basic planning—you need long-term care planning as well.

A healthy body isn’t achieved by fixing one aspect of your lifestyle and then stopping; it includes giving attention to diet, exercise, mental health, and environmental factors.  Neither does a healthy financial plan stop after making a change in just one area.  You must give attention to all the components of your body of investments to have a truly healthy financial portfolio.

**  Rocky Greene can be reached at Greene Financial Services in Naperville, IL, e-mail rockyg@wideopenwest.com.

We find that clients rely upon us for more than traditional legal advice.  We help clients and families put together the “aging puzzle” with its many ill-fitting pieces of frail health, caregiving needs, survivor care concerns, financial decisions, residential options, family relationships, insufficient assets, substitute decision-makers, cumbersome probate, end-of-life decisions, and more.  In fact, the legal advice we provide may be the least complicated piece of the client’s aging puzzle.

Due to the nature of our typical elder law representation, it is particularly important that we spend time educating our clients and their families to understand the attorney-client relationship.  We have a duty to represent our client.  Our client is usually the senior. Many times the client’s adult children have an agenda which conflicts with that of the senior. We strive to mediate those conflicts and seek our client’s best interests.

By contrast, when clients get information from other sources, whether it is the government, a care facility, their banker, or even another family member, the person giving the answers may be well-meaning, but it is not their job to put the senior-client’s interests first. In fact, most advisors must put their employer’s (or their own) interests first.  The elder law attorney is the filtering advocate for the frail senior. Our code of legal responsibility demands that we place our client’s interests first.

We must do what we are called to do as holistic professionals.  The scope of our legal services is defined by the client’s overall circumstances. We work at the juncture of estate planning, disability, Medicare, Medicaid, VA benefits, financial planning, health care, family dynamics, tax law, and medicine. We must collaborate with a network of other capable professionals. We seek to make our elder law practice “transformational” rather than “transactional.”  We must do more than legal task fulfillment such as resolving a dispute, drafting a document, or closing a real estate deal.  As elder law attorneys, we empower lives for the better in a way which will impact whole families for years to come. We believe that we are providing important services our clients cannot get elsewhere.

We strive to be trustworthy guides along the Elder Care Journey©.  As we look into the eyes of the aged and the infirm, we see our future selves reflected back to us. We give to our clients the same compassion, comfort, and care that we hope someone will offer to us when it comes our turn to go.

*** This blog was originally written by my friend, elder law attorney Dennis Toman, CELA, of Greensboro, North Carolina.  His website is www.elderlawfirm.com.

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The growing popularity of the Veterans Administration (VA) Aid & Attendance program has been fueled by financial services organizations promoting their products with the enthusiastic cooperation of long-term care facilities.  On the surface, it seems to be a great partnership, in that both the financial service organizations and the facilities are helping veterans obtain a benefit that helps pay for their care—right now. Unfortunately, these organizations may fail to take into account the probable long-term Medicaid issues of veterans, as well as the tax and investment-related issues associated with obtaining VA benefits. This short-sightedness could result in a care facility having some liability to a resident for future loss of eligibility for Medicaid benefits. This is what I call the “Medicaid Time Bomb.”

It is common for financial service organizations, under the guise of “supporting aged veterans,” to suggest that excess assets be given away to the veteran’s adult children and then placed in annuities. This is done to meet VA asset limitations.  Unfortunately, if within the next five years the veteran should require long-term custodial care in a nursing home, he or she soon discovers that the rules for obtaining Medicaid benefits are quite different than the rules for obtaining VA benefits.  The veterans can be denied Medicaid benefits and penalized for a period of time, largely due to the gifting of money to their children.

How can the Medicaid penalty situation be resolved?  The only cure is to have the annuities cashed in and returned to the veteran. But wait!  Cashing in an annuity often triggers substantial early-withdrawal penalties.  Due to these early-withdrawal charges, even if the gifted annuity is cashed in, the family will not have enough money from the annuity to cure the Medicaid penalty. When a veteran’s family realizes that the veteran has lost money and may still be ineligible for Medicaid benefits, they are understandably at the loss of both assets and Medicaid benefits. That is what I mean by the Medicaid Time Bomb.

Elder law attorneys owe a fiduciary duty (that’s a high duty of loyalty and protection) to their clients.  When we as elder law attorneys analyze a veteran’s overall situation, we must look at the best interests of our client both today and tomorrow.  We know that an annuity may be an important tool to use in both VA and Medicaid planning. 

A qualified elder law attorney concentrates his or her practice in the areas of estate planning, disability planning, Medicaid, VA benefits, guardianships, and elder abuse issues. Call our office to learn how you can avoid the Medicaid Time Bomb.