Elder Law and Bankruptcy

According to the National Counsel on Aging, 61.3% of households headed by an adult aged 60+ had some form of debt. Among senior households with debt, the median total debt was $40,900. (Federal Reserve Board). These figures are now three years old and the numbers just keep rising. More and more people are reaching full retirement age with voluntary debt, i.e. credit cards, or involuntary debt, i.e. uncovered medical expenses, that is crippling once regular streams of income have stopped and income is fixed at social security levels. But this is not the disturbing point.

The disturbing point is that so many of these seniors are unaware that their retirement savings is exempt from the claims of their creditors. In other words, the creditors never expected to be able to reach these protected savings when the decision was made to lend the money. Even if these savings were revealed on an application, the law protects them from depletion. So, the sad part is that seniors and their families routinely liquidate IRAs and 401Ks in order to pay off debt completely unnecessarily.

Estate planning does not usually touch on issues of current maintenance, budgeting, and planning for long term care. Insurance is often put in place to protect against “final expenses” but not to plan for, or cover, several months or years of custodial care on the way to those final expenses. Moreover, without proper planning, even if a senior keeps his/her retirement savings intact, those savings while exempt from creditors are not exempt from disqualifying a senior from their nursing home benefits under Medicaid. No one should have to lose their exempt life savings to creditors. No one should have to liquidate their savings and spend them down just to become eligible for nursing home benefits. The best way to avoid these problems is by planning wisely. That is what elder law attorneys do.

This article is written by an attorney at Wyatt & Mirabella, PC. Always consult an attorney before making any legal decisions. To make an appointment today for a free consultation, please click here to contact us.