The aging population of Baby Boomers have been forced to confront a myriad of both medical and financial issues in planning for the last decades of their life. Perhaps one of the most striking planning obstacles is the issue of aging alone. These individuals are referred to by various names: “elder orphan,” “senior orphan” or “solo ager.” Regardless of the moniker, these terms all describe someone without a spouse or life partner (widow or widower) or children (none living) on whom they can depend. The question is: How will health, financial and other life decisions be made for these solos when they’re unable to make them for themselves?
Silver Tsunami
Economists and demographers coined the term “silver tsunami” to describe the drastic shift in human population as the first Baby Boomers age. From 2020 to 2030, the number of individuals aged 65 and over is projected to increase by 30%, reaching 83 million people over 65 by 2050.1 Even more shocking, the 85 and older population is projected to more than double from 6.6 million in 2019 to 14.4 million in 2040 (a 118% increase).2 Regardless of gender, the proportion of individuals living alone increased with age, and approximately 22% of Americans over age 65 are currently at risk to become elder orphans.3
In one of the first studies aimed at understanding older adults who identify as elder orphans, 78% of the participants indicated they have no help with bills or financial decisions, and over half have no help with medical decisions. The study asked the participants on whom they would rely in making health care decisions on their behalf in addition to their physician. Forty-seven percent of the elder orphans answered that they would rely on a team of diverse health care professionals, while 16% answered that they would rely on their lawyer to make these important health decisions.4
Planning Documents
Ideally, while an individual is still competent, that individual will create advance directives, financial powers of attorney and/or revocable trusts. With those important planning documents in place, the elder orphan is much more likely to have their health and financial wishes followed and can avoid the need for surrogates, guardians or conservators. However, if an individual becomes incapacitated and hasn’t completed any of these estate-planning documents, they’re likely to end up in the court system. Although the name of the court process may differ state to state, generally an individual lacking capacity with no one to make decisions on their behalf will be the subject of a court guardianship or conservator case wherein the court will appoint someone to make decisions on their behalf.
Advance directives are legal documents in which the individual appoints a surrogate to make health care decisions for them. In your state, this document may be called an “advance directive,” “living will” or “health care power of attorney” (POA). An additional document individuals should consider is a portable medical order called a “practitioner orders for life sustaining treatment” (POLST) form. The POLST is a physician’s order that communicates specific medical orders for treatment wishes when the individual can’t speak for themself. It’s intended for those with a very serious illness or a set of individuals who are at high risk of a life-threatening medical event. POLST isn’t a unified federal program but is instead developed and implemented state by state. National POLST is an independent Internal Revenue Code Section 501(c)(3) non-profit organization that’s organizing an effort to standardize the POLST process throughout the United States. To date, there are 16 names for the POLST form including “POST,” “IPOST,” “MOLST,” “MOST,” “DMOST” and “TPOPP.” It’s important to be aware that your state’s program may be under a different name. In the majority of states, the POLST replaces the “Do Not Resuscitate” order.5
Health Surrogate Laws
About three quarters of all jurisdictions have some type of default health surrogate laws that assist medical professionals in dealing with patients who lack capacity and have no other representation. Most of these statutes have a hierarchy of people who can make health decisions on that individual’s behalf, but in most states, the list is predominantly comprised of family members.6 States have started to modify their statutes to provide more choices and flexibility by amending their laws to allow “close friends” or some variation of “interested adult.”7 As indicated by the growing numbers of elder orphans, this flexibility in choice is particularly important as many individuals lack the spouse or family member necessary for the outdated health surrogate laws. For example, The Illinois Health Care Surrogate Act8 provides the following order of priority:
(1) the patient’s guardian;
(2) the patient’s spouse;
(3) any adult son or daughter of the patient;
(4) either parent of the patient;
(5) any adult brother or sister of the patient;
(6) any adult grandchild of the patient;
(7) a close friend of the patient;
(8) the patient’s guardian of the estate;
(9) the patient’s temporary custodian appointed in Juvenile Court
In addition to health care decisions, an individual lacking capacity may also need someone to make financial decisions for them. A financial POA is a legal document in which an individual selects someone, or in some cases an organization, to act on their behalf in making financial decisions. Like a health care POA, the financial POA can be customized to meet the individual’s unique intentions and needs. State statute determines the requirements for the creation of a financial POA.
Care Management Agencies
Taking the initiative to complete advanced directives to effectuate your own wishes and avoid court intervention denotes choice. But who does the elder orphan, who has no spouse or family, choose as their agent to make these medical and financial decisions? One possible solution is to work with a care management agency. There’s a growing industry of these agencies that will act as agents for a fee. Although the availability of care management agencies varies from region to region, these agencies generally employ professionals from varied backgrounds including social work, nursing and general accounting. As these agencies grow in number, many have started to distinguish themselves by specializing in specific populations such as elderly, medically complex or those with a psychological diagnosis. Some individuals choose to work with care managers before they lose capacity, so the care manager will be familiar with their wishes, needs and concerns prior to them needing to act as POA. Some financial institutions may be willing to act as an agent in a financial POA if they’ll also be acting as trustee of an established trust.
Trusts Define Incapacity
The majority of trusts dictate under what circumstances a grantor serving as trustee of a revocable living trust is deemed incapacitated. Typically, the trust will indicate that the grantor’s physician makes the determination of incapacity. Although Health Insurance Portability and Accountability Act laws can present a challenge, often if an individual has a primary care physician who they routinely visit, obtaining a letter of incompetency is fairly straightforward. However, it’s become increasing common for individuals not to have a primary care physician. It’s estimated that 25% of Americans in their 60s don’t regularly see the same doctor.9 As such, nearly a quarter of the time, it can be difficult to locate a doctor able, or willing, to provide a determination of incapacity. Moreover, experts anticipate there will be a growing primary care shortage over the coming decade, which will further increase the number of people lacking an ongoing primary care relationship.
When there isn’t a consistent primary care physician treating the grantor, often questions of incapacity get raised when the grantor arrives at an emergency department or is admitted to the hospital. In these cases, when there’s no primary physician involved with the patient, determining incapacity falls to the hospital staff. Obtaining a letter of incapacity from an ER doctor or hospital attending physician isn’t easy in large part because they lack a relationship with the patient, and making a determination of ongoing incompetency can be difficult when only treating the acute medical issue that brought the patient into the hospital. To complicate things further, some trusts require two letters of incompetency. If the grantor feels it imperative to have such a provision in their trust, the drafter of the document should discuss with the grantor the difficulty of getting two determinations of incompetency and prompt the grantor to think through which doctors know the grantor well enough to make this determination. If the grantor can’t think of two, it might be best to eliminate that requirement.
Corporate Fiduciaries
If someone wants to create a trust but doesn’t have an individual to name, they can name a corporate fiduciary. Naming a corporate fiduciary makes certain that there will always be someone to act while ensuring that professionals who are skilled in money management, taxes and conservation of trust principal will administer the trust. Corporate fiduciaries are corporations, which means they are required to be licensed, bonded and insured. A corporate fiduciary is also subject to state and federal regulations and will be held to a very high standard of care. It’s important to consider the individual needs of the grantor when selecting a corporate fiduciary. Most national financial institutions have a trust department but generally aren’t willing to act on trusts under a certain dollar amount. Smaller corporate fiduciaries, such as local banks or stand-alone trust companies, are usually more willing to work with a lower net value and may be able to give the grantor more hands on attention.
Home Health Care Workers
Many individuals need assistance in the home as they age in place. There are always concerns when caregivers are in the home, but it can be more of an issue for elder orphans who may not have others checking on them. A care manager or corporate trustee can provide oversight of the caregiver. If there’s an agent under a health care POA, the agent is responsible for arranging for the care providers for the grantor, but it’s the trustee or agent under a financial POA that arranges for payment of those home health workers. It’s important for these two roles to work hand in hand.
Payment of caregivers is only a small part of what a trustee might have to do regarding home health workers. Many older individuals have trusted caregivers that are direct hire, not contracted through an agency. While that may not be a problem itself, there are a whole host of responsibilities in addition to simply paying wages. If caregiver wages are coming from the trust, the trust is the employer. The trustee is responsible for providing W-2s or 1099s, doing tax withholding and making tax payments, overseeing state and federal unemployment tax, adhering to local minimum wage and overtime regulations, processing timecards and maintaining appropriate records. In addition to the tax and reporting requirements, the trustee needs to manage liability issues that come with employment, such as providing workers’ compensation, monitoring for caregiver abuse and wrongful termination. A trustee should be aware of all the corresponding responsibilities that are associated with hiring employees and should strongly consider a payroll service that specializes in home health care employment.
For example, TEAM Risk Management Strategies (TEAM) is one firm many corporate trustees use whenever a trust hires the health care workers directly. Although located in California, TEAM services trustees all over the United States. TEAM is beneficial because not only do they handle the payroll and associated taxes, but also they effectively hire the caregivers so that the trust isn’t deemed to be an employer. A TEAM representative directly handles all payroll, HR and benefits for the caregivers. TEAM can employ almost any employee needed for a beneficiary’s care, whether it be a home health worker, farm hand, cleaning individual, tutor, etc.
Undue Influence
Unfortunately, some caregivers exercise undue influence over the grantor, and risk for financial exploitation is high. Whenever possible, limit access to cash, checks and bank accounts. There are ways to provide funds to household employees for things like groceries, transportation and outings without giving them cash. Many trust companies use the company True Link Financial (True Link) to provide funds in a more secure manner. True Link is essentially a pre-paid debit card that’s tied to an account the trustee sets up. Using the “spending monitor,” the trustee can control the categories of places the card can be used and dictate whether the card can be used to obtain cash and in what amount. Trustees can monitor the card’s usage in real time and obtain alerts when there’s an attempt at misuse or the card is low on funds. A trustee can fund the card only as needed or on a set deposit schedule depending on the trustee’s preference and the beneficiary’s needs. True Link partners with over 150,000 families and 250 trust companies.10
Guardian/Conservator
Individuals who’ve done no planning often need a conservatorship or guardianship when they lose the ability to make their own decisions. The terminology of guardian or conservator varies from state to state but is a process in which the court appoints an individual or corporate entity and, through that appointment, gives them the legal authority to make the personal and financial decisions for the person lacking capacity. State law establishes limits on the court-appointed guardian’s authority, and many actions such as buying/selling a home or changing an individual’s placement may require prior court approval.
Business Opportunity
Helping senior orphans opens up an expansive and unique opportunity for professionals of all types to do critical planning for their clients. Becoming familiar and adept with these tools can offer opportunities to add value to and expand your business.
Endnotes
1. “2020 Profile of Older Americans,” Administration for Community Living (May 2021), at p. 5.
2. Ibid.
3. Carina Storrs, Special to CNN, “The ‘elder orphans’ of the Baby Boom generation,” https://edition.cnn.com/2015/05/18/health/elder-orphans/.
4. “Study: Understanding Older Adults that are Aging Alone,” www.seniorcare.com/featured/aging-alone-study/.
5. https//polst.org.
6. Marit Peterson and Linda J. Camp, “Meeting the Challenges of a New Generation of Solo Agers,” Bifocal (February 2018).
7. Thaddeus Mason Pope, “Unbefriended And Unrepresented: Better Medical Decision Making For Incapacitated Patients Without Healthcare Surrogates,” Ga. St. U. L. Rev., Vol. 33, Issue 4 (Summer 2017), Article 3, at pp. 42-43.
8. 755 ILCS 40/25.
9. David M. Levine, Jeffrey A. Linder and Bruce E. Landon, “Characteristics of Americans With Primary Care and Changes Over Time, 2002-2015,” JAMA Intern Med. 2020, https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2757495.