Protect A Life of Working and Saving from Long Term Care Costs

Every month, Lawrence Cappiello writes a check to a nursing home for $12,000 to pay for the cost of his wife’s nursing home care. Two years ago, his net worth was $500,000. In less than two years, the Cappiello’s savings will be gone. This unsettling story is explained in the article “How to Keep LTC Costs From Devouring Your Client’s Life Savings” from Insurance News Net. He is suffering from nursing home sticker shock and says he should have known better.

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What Exactly is Long-Term Care Insurance?

Some people confuse Long-Term Care (LTC) with Long-Term Disability Insurance. The disability insurance coverage is designed to replace earned income in the event of a disability. Others think that LTC is a type of medical insurance.

nj.com’s recent article entitled “The benefits of long-term care insurance” explains that long-term care insurance isn’t meant to be disability income replacement, and it isn’t medical insurance. LTC insurance covers the varied personal needs of persons who are ill and (even temporarily) incapacitated. This includes feeding, clothing, bathing, and driving to appointments and doing the extra washing.

Some people consider LTC insurance as what was once called “Nursing Home Insurance.” This evolved to include either care at home or care in a rehab or nursing home facility.

Married couples are especially susceptible, when one spouse becomes ill or injured because the extra costs of long-term care can eat up all their savings and bankrupt the caregiver spouse. For that reason, those in their 50’s should start to look at LTC insurance for several reasons:

  1. Annual premiums are lower when acquired at younger ages; and
  2. Aging may bring health issues in the future, which may prohibit the opportunity to buy LTC insurance coverage altogether.

There are many ways to tailor LTC coverage to make it affordable. The most critical components of an LTC insurance policy include the following:

  • The average period of need for most is three years.
  • The daily amount of coverage varies by geographical area.
  • Home care should be the same as that for care in a facility.
  • The waiting period, which determines when the coverage actually starts after the date the incapacity began.
  • Married individuals can get a combined policy with a discount.
  • An inflation rider: The daily cost of coverage will naturally increase over time with inflation, selecting a rate of inflation will ensure keeping up with rising costs in the future.

Every family should have an open discussion about potential illness or incapacity of family members, and LTC should be a part of that.

Reference: nj.com (January 6, 2019) “The benefits of long-term care insurance”

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Savvy Ways for Seniors to Give Away Their Money

You do not have to be a millionaire for your loved ones to squabble about things you give away. Families have split up over who received a necklace or the candlesticks. You could try to give everyone an equal portion, but that is seldom possible. Sentimental value is hard to measure. You might also have reasons to help one person more than another.

There is no need to worry. There are strategies you can use to keep the peace, without feeling that your relatives are dictating what you can do with your assets. Here are some savvy ways for seniors to give away their money and other items.

Analyze the needs of your children. Let’s say you already put your older children through college, but you have a much younger child who is not yet college-age. While your older children might feel that it is unfair for you to give your younger child more money than them, your older children already received more than the younger child, and he will need the money for college.

If you have a child with special needs, you might want to set up a special needs trust for her support. Funding such a trust might require a disproportionate division of assets.

If you have circumstances like these, talk to all your children now or leave a letter explaining what motivated you to make an unequal distribution. Without sufficient communication, your children might think that you played favorites. Some families harbor grudges for years, because they made incorrect assumptions.

If you still have concerns about resentment over unequal distributions, you might be able to keep a disgruntled relative from filing a will contest. In many states, you can include a “no contest” clause in your will. In short, these clauses provide that if someone contests the will, the contesting person forfeits what he would have inherited through the will.

Funding a child or grandchild’s college education now. If you do not want to wait until an uncertain date in the future to contribute to your child or grandchild’s education, you can do so now through a 529 plan. The most strategic way to do this is usually through a plan the child’s parent sets up, but you should check with your tax advisor. If the funds are for your child, you can set up the plan. For your grandchildren, you can contribute to the plan the child’s parent started.

The best way to pass along your stocks or mutual funds. It is important to be aware that the tax laws are constantly changing, so you should always check with your tax advisor about the current tax considerations. This blog does not purport to give tax advice.

That said, usually, the way to minimize taxes on stocks and mutual funds that you give to your loved ones, is to wait and give them to your heirs through your will or trust. You might have reasons to give them the assets now, however, and you want to manage the transfer without Uncle Sam taking more than he should.

After all, the less that you or the recipient have to pay in taxes on the transfer, the more value that remains for your loved one’s benefit. Sometimes it is more advantageous to give the actual stock, rather than to sell it and give the proceeds, after capital gains tax. After talking with your tax advisor, contact your brokerage firm to find out the steps you have to take to transfer your investments.

The laws are different in every state, so you should talk with an elder law attorney near you.

References:

AARP. “How to Give Your Money Away.” (accessed November 28, 2018) https://www.aarp.org/money/investing/info-2018/giving-money-to-family.html

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How Do I Discuss Care With My Aging Parents?

Discussing the next steps isn’t an easy conversation, but if you plan ahead it can be less painful for everyone involved, says KARE 11 in Minneapolis in the article, “Making the best care decisions for aging parents.”

Many families find this out the hard way. When a parent requires immediate urgent care, the family must jump into “go” mode. It can be overwhelming. There are many options, which range from various levels of in-home care, to independent living, to assisted living and even to skilled nursing care. You should understand the level of care you need and what you can afford.

Unless you qualify for Medicaid, you’ll need to pay for assisted living out of your own pocket. For most of us, this could drain assets in short order. Many people also aren’t planning for long-term care in retirement.

It’s best to plan early. If you’re going to buy a long-term care policy, the best time to apply is in your 40s or 50s, when your health is good and the cost is cheaper.

Sit down with an elder law attorney, regardless of your assets, because the laws concerning Medicare and Medicaid are confusing. Every situation is also different.

Many people aren’t aware that Medicare doesn’t cover many long-term care services. In fact, that limited benefit is designed to get somebody back to independent living, not help them with basic activities of daily living. Therefore, if it becomes a situation where somebody is going to need help with such basics as dressing, bathing and other activities of daily life for the rest of their life, Medicare is not going to cover it.

If you believe gifting your estate away now will stop you from losing it in the future, remember that most states have a five-year look back period. Any gifts of money or property in the 60 months before applying for Medicaid, can be taken back to pay for the program or the applicant will be penalized.

It’s difficult enough to make the decision to place your parent in someone else’s care, let alone to fret about how you’re going to pay for it. Plan now, if you can.

Reference: KARE 11 (Minneapolis) (November 27, 2018) “Making the best care decisions for aging parents”

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