Common Costly Mistakes To Avoid

Recent news stories highlight how small mistakes can create real problems for you as you grow older. Here are two you can learn from.

Example #1: Plan for the Worst When it Comes to Health

CBS news recently produced a story about the serious consequences of assuming you will always be as healthy as you are today. The article, which you can find at https://www.cbsnews.com/news/dont-make-this-dangerous-medicare-mistake/, tells the story of a healthy, active senior who had never been sick a day in her life. At age 65, she was happy to sign up for Medicare but did not feel the need to get plans to supplement Medicare or pay for prescriptions.

Unfortunately, she had a stroke at 70 and “… spent about 10 days in a hospital, followed by many days in a skilled nursing facility for rehabilitation. Now she’s facing many thousands of dollars in bills for hospital, doctors, physical therapy and rehab charges because she wasn’t aware of Medicare’s high deductibles and co-payments.”

The lesson to learn is: don’t assume you will always be healthy. While that may seem pessimistic, we prefer to call it realistic when it comes to planning. If the woman in this case decided to buy a Medigap plan after her stroke, she might be denied coverage outright or pay a much higher price because insurance companies are allowed to take a pre-existing condition into account for pricing if you don’t enroll during the initial enrollment period at age 65. She can enroll in a Medicare Advantage plan, but her preferred doctors might not be in network.

The lesson is that as you approach age 65 you should educate yourself about Medicare and Medicare supplements and assume you will need medical care in the future. Even if you are beyond your initial Medicare enrollment period and don’t have supplemental insurance you have options. It’s better to sign up late than to try to sign up after a significant medical event.

As estate planning professionals we also recommend documenting how you want to treated if you become incapacitated by illness, by naming a person to make medical decisions for you if you cannot speak for yourself and taking steps to protect your assets so Medicaid can pay for nursing home care if you need it. These important documents are part of a comprehensive estate plan.

Example #2: Avoid Costly Rookie Mistakes

Warren Kozak described an unexpected wrinkle in his planning in a Wall Street Journal op-ed on April 28. “I pride myself on keeping meticulous financial records. But since my wife died on January 1, I discovered I had made some real rookie mistakes that led to hours of extra work and substantial fees,” he said in the article. ( https://www.wsj.com/articles/you-can-limit-deaths-financial-costs-if-not-the-emotional-ones-1524868461?mod=searchresults&page=1&pos=1)

When Kozak and his wife opened checking and savings accounts, they did not name each other as beneficiaries – they assumed the accounts would automatically transfer to the surviving spouse when one of them died. They also failed to name each other as beneficiaries of their retirement accounts and mutual funds.

The easy-transfer assumption was wrong and Kozak had to hire an attorney and go to court to become executor of his wife’s estate to legally access the accounts. At the time the article was published he had spent more than $7,000 in attorney fees and court filing fees. The lesson to learn is to make sure you have named a beneficiary on all financial documents and keep those beneficiary designations current.

A qualified estate planning and elder law attorney can help you address all of these issues before they become costly mistakes.