Protect Yourself and Your Family from the Costs of Long Term Care

The odds that you will end up in a nursing home before you pass away are high. Some studies show the probability of adults over the age of 65 needing a Long Term Care stay at some point during their lives nearing 50%.  Most folks, including many of the clients we meet with in our estate planning practice have no plan to minimize the burden on their estates and their families.  The truth is that people often avoid facing the reality of the Long Term Care threat, avoid taking action while they still can and avoid discussing their Long Term Care plan with their families.

The odds of falling prey to Long Term Care are staggering and the cost can be even more so.  A year in a Georgia Nursing Home averages more than $40,000.00 and promises to keep rising.  Many Americans hold the mistaken belief that Medicare and Medicare Supplemental Insurance will cover Long Term Care.  At best, Medicare covers only part or all of the first 100 days of care.  Most Long Term Care costs are paid out of your own pocket.  Once your assets have been spent down to the applicable poverty level ($2,000) you may qualify for Medicaid, a government Long Term Care program. Medicaid is a welfare program.

Against this backdrop, Long Term Care Insurance (LTCI) has become one of the fastest growing insurance products in the country. Fortunately LTCI can be designed to fit almost any budget. Most LTCI policies share some common features you should know and should be looking for:

1.  Benefit Amount: How much will the policy pay?

2.  Benefit Triggers:  When will the policy pay benefits?

3.  Inflation Protection:  Will the purchasing power increase?

4.  Level of Care: Are Custodial and Intermediate Care covered, along with Skilled Nursing Care? Is Home Health Care covered?

As with any form of insurance, the policy is only as good as the ability of the insurance company to pay your claim.  Check out the financial strength and reputation of the insurance company and seek competent legal counsel to interpret the contractual provisions of any LTCI policy before you sign on the dotted line.  As always, when considering these types of planning strategies, talking with a competent estate planning attorney before you sign any contract is a must.

Paul Newman’s Will

Paul Newman’s will showed up on the internet over the weekend.  Here’s a link http://tinyurl.com/5at7eq.  The will has been filed in the probate court in his hometown of Westport, Connecticut.  The will contains all of the details of Cool Hand Luke’s estate including the fact that he left his Academy Awards from The Color of Money to his Newman’s Own Foundation and that the bulk of his estate including his production companies to his wife Joanne.  The will designates that some property be distributed to the Trustee of the Paul Newman Living Trust Number One.  I’m curious as to why the assets mentioned in the Will were not funded into the Living Trust.

What Everyone Should Know About Protecting Themselves in a Recession

Six Steps You Can Take to Minimize Your Risk in Uncertain Times

1 – Control What you Can Control

The tremendous turmoil in financial markets and financial institutions has caused a great deal of concern for many of us. It’s important to realize that, while we cannot control what happens in the stock market, we can control what we do with respect to our estate planning. Now, more than ever, it is vital to have a plan in place that will protect your assets, provide for your family and spare them the burden and expense of probate. These are things over which you have control. By taking control over the things in your life that you can control, you will be left with a wonderful sense of empowerment that will make the uncertainties of the world seem less scary.

2 – Turn Off the Television

This piece of advice goes along with number one. What is happening on Wall Street as the markets correct themselves is something which is out of your control. Other than doing your civic duty and voting when it comes time to, neither you nor I can do much to affect what happens in the global economy. So, why worry about it. Stressing out over whether Congress passes a bailout bill and what happens in the stock market is not going to help you make any decisions about what you need to do and adds stress unnecessarily. So do yourself a favor and turn off the TV.

3 – Insurance

Based on your age, your income and your asset level, make sure you have enough insurance in place to protect you and your family in the event of death, disability, or a long term medical condition. This is one of the most important things you can do to protect your family. This also falls under the heading of things WE CAN CONTROL. By having an appropriate amount of insurance in place, you can make sure that your family will be taken care of if something unexpected happens to you. And oh, by the way, it’s far more likely that you will suffer a disability than death anytime soon, so make sure that you have adequate disability insurance in place to maintain your lifestyle if you can’t work any longer. Almost as important for those over fifty is to make sure you have long term care insurance in place. As time goes by rates for long term care insurance will rise and now is the time when you can lock in a premium.

4 – Business Succession

If you own your own business, now is the time to make sure that there are plans in place to transition your business to the next generation. Seventy per cent (70%) of family businesses in the United States do not survive past one generation and only three per cent (3%) make it to the fourth generation. Having the right plans in place and establishing the right relationship between your family and your business are keys to long term success.

5 – Savings

Now is the time to focus on frugal living. If you do not work with a financial advisor currently, sit down with one today. The real value you can get from working with a financial planner it to take a serious look at what you are spending money on and what you can cut to increase your savings. Also, if you have any lingering differences with your spouse over money, this is the best way to get those issues out in the open and discuss them with an unbiased and neutral third party.

6 – Living Trust – FDIC Protection

Because of the increased protection your assets can have from the FDIC in a Living Trust, now may be the perfect time to set up a Living Trust for the protection of yourself and your family. Under new FDIC rules, accounts held within a Living Trust have FDIC protection of $100,000 for each beneficiary of the trust. This can greatly increase your level of protection. For more info on this here’s a link to an article on Bloomberg.

The Silver Lining in Tough Economic Times

The economy is weaker than it was in the late 1990s. Interest rates have been rising. Food and energy prices have been skyrocketing. Home prices have been falling. It is getting to the point that we don’t even want to watch the news anymore.

However, there is a silver lining behind the dark economic outlook. As home prices fall and interest rates rise, one estate planning strategy for persons with taxable estates becomes particularly attractive. A Qualified Personal Residence Trust or “QPRT” is a great way to get the value of your home out of your estate for estate tax purposes at a discount. You transfer your home to an irrevocable trust you set up for that purpose. You retain all rights in the home for a period of years, which you select. After the expiration of the period, you can continue to live there by paying rent to the trust (which further helps diminish your taxable estate). The amount an individual can leave estate tax-free is $2 million, rising to $3.5 million in 2009, but then falling to only $1 million in 2011. If you have less than $1 million in assets, a QPRT may not be an appropriate estate planning strategy for you.

Let’s look at an example. In 2003, your home was worth $500,000. Today, it is worth $400,000. The interest rate used by the IRS was 3% in 2003. Let’s say that at the time of your transfer that interest rate has increased to 5%. Let’s further assume you are 70 years old and keep a retained interest for 8 years and then pay rent. The actuarial value of the remainder interest gifted to your kids in 2003 would have been approximately $292,000. If you did that same transaction in today’s environment with the home at $400,000 and the interest rate at 5%, the value of the gifted interest would be less than $200,000. That’s about a 31.5% reduction in the value of the gifted interest. Let’s say your home goes up in value to $800,000. You will have gotten the whole thing out of your estate for a value of less than $200,000! This preserves more of the amount that can pass estate tax-free to be used for your other assets.

As you can see, this is a great time to think about this strategy. The higher the interest rates and the lower the home values, the more powerful this strategy becomes. There may not be much to be thankful about in economic news nowadays. But, this can be a great time for certain estate planning strategies like this one. A qualified attorney who focuses his or her practice in estate planning can help you design and implement a strategy for these tough economic times that meets your unique needs.

Ashes to Ashes

What happens after a person’s remains are cremated? According to a recent AP story the answer is often – nothing at all.

Cremation has risen in popularity as a means for families to deal with a loved one’s mortal remains. There’s no real surprise there, considering concerns of cost, space, etc.

What is surprising is that many of those families wind up leaving their loved one’s cremated remains with the funeral parlors or crematories indefinitely.

Apart from a sort of morbid interest, of what value is this information? Well, it brings to light the importance of making clear your intentions for all parts of your estate (including your Earthly remains). Does your family know what your wishes/instructions are for your funeral, memorial, burial/cremation, and ultimate laying to rest?

The right estate plan, drafted by the right estate planning attorney, should give you the chance to make those wishes clear. Give careful thought to how you’d like things to go. Make sure you take the opportunity to put those wishes down on paper in a way, and a place, where the right people will be sure to discover and understand them.

Reasons To Have A Living Trust

This is a link to an article on Andrew Ewalt’s blog.  He’s an estate planning attorney in Connecticut.  In the article, he gives a very succinct list of all of the great reasons that a Living Trust is simply the best way to plan your estate.  It’s not the only way, and it’s not the right answer for every client, but in most cases, the Living Trust should be the preferred Estate Planning tool.

Andrew Ewalts Law Blog: Reasons To Have A Living Trust

Newswise Medical News | Mild Alzheimer’s Patients Show Rapid Decline in Financial Skills Over One Year

This article details a new study on Alzheimer’s disease out of the University of Alabama Birmingham which demonstrates a significant deterioration of an Alzheimer’s patient’s ability to manage financial affairs within one year.  This highlights why it is so important to do early planning and that if someone you know or love is diagnosed with Alzheimer’s it is best to get any financial or estate planning matters squared away immediately.

Newswise Medical News | Mild Alzheimer’s Patients Show Rapid Decline in Financial Skills Over One Year

Britney’s Family Takes Control

I don’t usually pay much attention to pop culture, except when it intersects with estate planning.  Britney Spears’ recent problems did not even register on my radar until I stumbled across this article which indicates that Britney’s family has taken over management of her affairs through a conservatorship.  A conservatorship is a probate proceeding to appoint a petitioner (who is usually a family member or other responsible party) to manage financial matters for an incompetent adult (in Georgia anyway).  The petitioner must prove to the court through testimony and affidavits from doctors that the ward is unable to handle his or her own affairs.

Mistress battles Cobb millionaire’s kin over estate

This story from the Atlanta Journal Constitution details a will dispute winding it’s way through the Georgia courts. The validity of certain amendments to the will made by the testator in the days just before his death is being decided by the Georgia Supreme Court.

Link