Personal Finance

Don’t Let End-of-life Health Care Costs Drain the Value of Your Estate

Senior Estate Planner, Michael Repak, discusses the importance of establishing
an end-of-life health care plan to protect the value of your legacy.

Health Care and Nursing Costs

Today, Americans are paying more out-of-pocket health care expenses than ever before. End-of-life care, the care a terminally ill person receives during the advanced stages of illness, can be extremely expensive, reducing the value of your legacy you leave behind. To put it into perspective, an estimated one-quarter of traditional Medicare spending for health care services is spent on services provided to Medicare recipients for end-of-life care.1

Major expenses can be incurred at this stage of life by failing to express preferences on the type of care wanted, or more importantly, not wanted as end-of-life approaches. Research has found, for example, that most adults surveyed (90%) say they would prefer to receive end-of-life care in their own homes if suffering from terminal illness, yet data shows that only about one-third of Medicare beneficiaries (age 65 and older) actually died at home.2

Given the tremendous costs of end-of-life care, it is often desirable and advantageous to buy long-term care insurance in one form or another. Traditional long-term care insurance provides for a maximum daily benefit, usually after an exclusionary period, to be used for nursing home or in-home nursing care, under circumstances where certain activities of daily life can no longer be done alone. One feature of this type of insurance that is extremely important to evaluate is the ability to build in an inflation rider so that the benefit paid for does not decrease over time. It is also possible to purchase either an annuity product or life insurance policy that may be accessed if long-term care becomes necessary at some point.

It’s imperative to be thorough in your planning or you may end up in a place you don’t want to be or receiving treatment you would not choose if you were able. However, some sound planning prior to reaching this stage can help significantly reduce out-of-pocket, end-of-life costs. Here are some actions you can take to reduce these costs and their impact on your estate.

Documents to Consider to Protect Your Wishes Later in Life

One of the best tools in end-of-life planning is a living will, also called a medical directive or advance care directive. This document serves to instruct your family and caregivers as to which types of treatment you would prefer not to have, as well as those you would. An advance directive only becomes effective if and when you become incapacitated and cannot make decisions for yourself, no matter what age. An advance care directive can be a standalone document, or oftentimes, can be incorporated into a health care power of attorney (also known as a durable power of attorney for health care).

A durable power of attorney for health care gives your named representative, or agent, the legal ability to step into your place to make decisions on your behalf, should you become unable to do so because of illness or incapacity. These documents usually have two parts. One part takes effect immediately after signing, and gives your agent the ability to access your health records under the HIPAA provisions under the law. The second part only goes into effect if you become unable to make decisions, and allows your agent to make all health-related decisions on your behalf. The document will usually include instructions for your agent, although it’s always best to communicate these wishes directly to your agent prior to any need for action. This document will require many decisions to be made, including whether to donate organs for life-saving purposes, as well as whether to donate to medical research.

A “Do Not Resuscitate Order” (DNR) tells your medical professionals that, in case of a permanent, irreversible state of unconsciousness, no heroic measures to bring you back to life should be attempted. Depending on the state in which you live, a DNR may need to be updated more frequently than your living will or health care power of attorney would.

Finally, a durable general power of attorney should be signed, giving your agent (either the same person as the health care power of attorney, or another individual(s)) the ability to make legal decisions as well as handle all financial transactions for you, should you become unable to act for yourself. The choice of agent is very important, as this should be someone you feel comfortable sharing all of your financial information with.

In the absence of having a signed health care power of attorney, as well as a durable general power of attorney, your family may need to have a guardian appointed in order to do things such as make health care decisions (including end of life choices), pay your bills (including medical bills), file your tax returns, and make investment decisions. Having a guardian appointed takes time, and can be expensive during a stressful time.

Funeral Planning

Many individuals are now taking the step to pre-plan and pre-pay for their own funeral expenses. In addition to knowing that the funds will be available and ear-marked for your funeral, this type of planning may get as detailed as choice of flowers and music, as well as choice of venue for services and reception for your family. Pre-planning in this manner will allow your family to move through the process with minimal stress and less pressure to make financial decisions that may not coincide with your wishes. 

Your Janney Financial Advisor and our supporting team of experts are always ready to help you to make the decisions that are in the best interests of you and your family. 

1.Gerald F. Riley and James D. Lubitz, “Long-Term Trends in Medicare Payments in the Last Year of Life,” Health Serv Res 2010;45 (2): 565-76; Christopher Hogan et al., “Medicare Beneficiaries’ Costs of Care In The Last Year of Life,” Health Aff (Millwood) 2001;20(4):188-95.

2. Approaching Death: Improving Care at the End of Life, Institute of Medicine, 1997; Joan M. Teno et al., “Change in End-of-Life Care for Medicare Beneficiaries,” JAMA 2013;309(5):470-77.

Michael Repak
Michael Repak
Vice President/Senior Estate Planner

Mike provides advice and guidance in all aspects of financial, tax, and estate planning issues. He earned his Bachelor’s degree from William Paterson University in Wayne, New Jersey, and has a Master’s degree from the University of Wisconsin in Madison, Wisconsin. He has a CPA/PFS credential, and Series 7 and 66 securities licenses. He received his J.D. from the University of Florida and his LL.M. in Tax Law from NYU. 

He has been an adjunct professor in the MBA program at Temple University and is a sought-after speaker for professional conferences and events. He is also frequently featured as a Money Doctor on, the public education site of the American Institute of Certified Public Accountants. Mr. Repak has served on several non-profit and civic boards, is a graduate of Leadership Philadelphia, and a member of the Union League of Philadelphia.

Janney Montgomery Scott LLC, its affiliates, and its employees are not in the business of providing tax, regulatory, accounting, or legal advice. These materials and any taxrelated statements are not intended or written to be used, and cannot be used or relied upon, by any taxpayer for the purpose of avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

Updated 9/16/16

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