How to Prepare for Emergencies
- Financial PlanningIn the immortal words of Andy Rooney, “It’s paradoxical that the idea of living a long life appeals to everyone, but the idea of getting old doesn’t appeal to anyone.”
It’s not easy to think about experiencing cognitive decline or becoming frail. Last month, I wrote about how to plan for death, so this month I want to focus on how to plan for this related scenario. It’s not the most uplifting topic, as evidenced by the fact that most of my clients had a really hard time getting this done as part of their financial life plan. But the truth is that if we don’t die young, we will live until we’re old…so we’d better be ready for it!
How can we get ready for a health emergency, whether it’s temporary or more permanent? Below, I’ll summarize some of the steps I recommended you take to prepare for death, since doing them once will cover both scenarios. I won’t go through those steps in detail since they are available in the other post, but I will add some steps and information as relevant for the emergency scenario.
1. Death and Emergency File: Start a file where you keep all the information you gather as part of this process.
2. Financial Fact Sheet: Create a list of all your assets and liabilities.
3. Digital Estate Plan: Build a list of all your online assets.
4. Estate Plan: There is more to think about here than just your will. Here is a quick summary of the other documents you need to protect yourself in an emergency. See an estate attorney to create these documents and get them properly witnessed.
a. Legal Power of Attorney (POA): In this document, you designate someone to make legal decisions for you if you’re incapacitated.
b. Healthcare Power of Attorney (POA): In this document, you choose someone to make your healthcare decisions if you can’t make them yourself. For this and the Legal POA, note that if you don’t have the appropriate legal documents, the courts will generally appoint your closest relative to make these decisions. Is that really what you want? And please check with the people you designate as POAs, to make sure they are aware and willing to act for you in these ways.
c. Healthcare Directive/Living Will: This document tells everyone what you want to happen in certain healthcare situations, in case you can’t tell them your preferences yourself. You can specify which medical treatments and life-sustaining practices you want, such as resuscitation, ventilation, or feeding via a tube. This document typically covers non-emergency situations; for example, when you’re recovering in a hospital or when you’re in a nursing home.
d. Revocable Living Trust: This document outlines how you want your assets to be managed if you die or become incapacitated. You transfer or retitle your assets into the trust, but you continue to serve as trustee and control those assets while you’re alive and well. In case of emergencies, there will be a successor trustee you’ve chosen to manage the trust. The trust should also include a provision to spell out exactly what it means for you to be incapacitated, so everyone is clear. It is revocable, meaning that you can change any of the terms, successors, or beneficiaries at any time. You can even get rid of it altogether if you want to.
5. Portable Orders for Life-Sustaining Treatment (POLST): The name of this form might vary slightly from state to state, but you complete it with your doctor and keep it in a handy location at home. It guides the treatments and practices emergency medical services (EMS) personnel can deliver to you. The form is usually used by people who have a serious illness or who are very frail, so that the EMS personnel don’t cause them more harm than good by giving them CPR, for example. However, anyone can have an Advance Directive if they want to and it applies across medical care settings like your home, hospitals, and care facilities. You can find your state’s form here.
6. HIPAA Authorization: This form allows your medical providers to disclose health-related information about you to the people or entities you designate. If you want your providers to be able to tell certain people what’s going on with you in an emergency situation, you’ll need to complete a HIPAA authorization specifying exactly what is OK to share and with whom. You’ll typically need a separate form for each medical practice or healthcare organization you visit.
In emergency situations, your providers are allowed to disclose information to family members if they think it’s in your best interest, but they can’t do that for friends, or for a partner if you’re not legally married. Let’s not leave it to the discretion of the medical professionals; get that HIPAA Authorization in place.
7. Emergency Contact List: Once you’ve made all the relevant decisions and have your legal documents in place, you’ll need to create a list of emergency contacts. First, you’ll want to include any friends and family members who should be notified if something happens to you. You will also want to include the people you designated as your Legal and Healthcare POAs. Finally, be sure to add your financial advisor, estate attorney, accountant, insurance agent(s), and caregivers as relevant. Make sure your own contact information is listed, too.
8. Household information List: This will include all of your utility accounts and other service providers (gym, safety deposit box, home alarm, storage unit, homeowner’s association, etc.) so people can make sure your bills are paid and services shut off, as relevant.
9. Personal Notes: Pull together your wishes for what you want to happen if you become incapacitated, such as where you want to stay and who you want to care for you. Your caregivers might not be able to comply in every case, but it will help guide everyone and hopefully avoid disagreements.
10. Medical Information: You will also need a separate section in your file for all of your medical information. It should include your medications and supplements, allergies, medical history, current doctors with their contact information, and insurance account numbers. Make sure you include any life, long-term disability, and long-term care policy information so people can get you the care you need.
11. Key Exchange: It’s probably a good idea to give a key or instructions for how to enter your home to a friend or family member who lives near you. If no one has heard from you for a while, they can stop by and check on you, or if you’re sick but don’t need an ambulance they can get in to help you.
There are also a couple of health-related issues you will want to include in your planning. The first applies only if you are still working: long-term disability insurance. For most people in the US, their employer’s short-term disability insurance will cover 100% of their pay if they can’t work because of an illness or injury. If that illness or injury continues for longer than 90 days, the employer’s long-term disability policy (if they have one) kicks in to cover about 60% of their pay. If your employer is the one paying for these policies, the disability pay you receive is taxable, so you’re really looking at about half your pay in this situation.
Do you see the issue here? I don’t know many people who can live for an extended period of time on 50% of their income. If you can, that’s great! If not, you need an individual supplemental long-term disability policy to fill that gap. If you are self-employed, you have NO short-term or long-term disability insurance unless you go and purchase it for yourself. In either case, go see an insurance broker to find the best policy for you.
The other issue to plan for is long-term care. Long-term care services are provided when people have an illness or injury that takes a long time to recover from, or is chronic. These services are also provided when you become too frail to manage on your own, or when you experience cognitive decline. Some examples of these services include in-home care, assisted living, and nursing homes.
Most people think Medicare covers this situation, but it doesn’t. Medicare covers hospital care, doctors’ care, and prescription drugs. It will pay for a short-term stay ONLY in a skilled nursing facility within 30 days of a hospital stay of three or more days. 90% of these stays are for 60 days or less; this is short-term coverage after an acute event, not help for people who can’t cook their own meals any longer. Social Security Disability and your long-term disability insurance also won’t do the job (see my previous post here), so you will need long-term care insurance or some other plan to pay for this kind of care. I recommend talking to your financial life planner about this issue; if you decide to buy long-term care insurance, your planner may be able to help you, or you can see an insurance broker.
Finally, as I recommended in my post about death, make sure you review and update your emergency plan at least once a year, and pop in with changes as they happen. Be sure you’ve communicated with the relevant people about your wishes and where you keep your plan.
And I’ll leave you with another quote, this time from David Bowie: “Aging is an extraordinary process where you become the person you always should have been.” Here’s hoping we all last long enough to do that.
