Long Term Care Insurance in your Retirement Plan

Include long term care insurance in your retirement plan to protect your legacy from rising costs such as the nursing home, assisted living and in-home care.

Roughly 60% of those turning 65 can anticipate using some form of long term care in their lives, according to the U.S. Health and Human Services Department. It may be a nursing home, assisted living, or in-home care.  Long term care insurance is a great way to cover those costs.

CNBC’s recent article, “Not having long-term care insurance can be ‘the single biggest devastator’ of your financial plan,” reports that over 8 million Americans have long term care insurance. However, the cost of that insurance is rising. This increase is because of several factors, including the fact that companies underpriced their policies for years and misjudged how many would drop coverage.

Because of those rising premiums, some individuals may choose self-insurance. That means saving a pool of money to earmark for long term care. Coverage is also available through Medicaid, which has eligibility requirements.

Even with these increases, you should consider purchasing some form of coverage. This is because not being insured can be the biggest devastator of a financial plan.

The rule of thumb has been to buy LTC coverage at age 55. However, it really depends on your situation. The big unknown is health, and the odds of being able to qualify for coverage at age 60, compared to age 30 or 40 is vastly different.  See here for a fuller description.  https://www.galliganmanning.com/when-should-i-consider-long-term-care-insurance/

A traditional LTC policy will cover the costs of care for a certain period of time, generally up to six years. The amount of coverage is based on the average cost of care for your location. Most insurers offer it in the form of a monthly benefit, and possibly with some inflation protection.

There’s also a hybrid policy that covers long term care costs but becomes life insurance paid to heirs, if it’s not used. Of the 350,000 Americans who purchased long term care protection in 2018, 85% chose the hybrid coverage. It’s also called combo or linked-benefit. The big difference is price: you’ll pay more for the hybrid policy.

Medicaid is another option, particularly if you don’t have a way to save. To be eligible, you must meet financial guidelines.  Medicaid also looks back five years into your finances, so if you have given away any money during that period of time, it may be subject to penalty.

Long term care insurance is a great tool to address rising long term care costs in your retirement.  If you don’t have or can’t get a policy that’s right for you, an elder law attorney can help explore Medicaid or other benefit options to cover your long term care needs.

Reference: CNBC (October 14, 2019) “Not having long-term care insurance can be ‘the single biggest devastator’ of your financial plan”

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The Biggest Estate Planning Mistakes to Avoid

Some of the biggest estate planning mistakes are easy to avoid, including having an up-to-date will, checking beneficiary designations and planning younger.

Nobody likes to plan for events like aging, incapacity, or death. However, failing to do so can cause families burdens and grief, thousands of dollars and hundreds of hours.

Fox Business’ recent article, “Here are the top estate planning mistakes to avoid,” says that planning for life’s unexpected events is critical. However, it can often be a hard process to navigate. Let’s look at the top estate planning mistakes to avoid, according to industry experts:

  1. Failing to sign a will (or one that can be located). The biggest mistake is simply not having a will. I’ve written on this often (see here for example https://www.galliganmanning.com/everyone-needs-an-estate-plan/), but unfortunately clients consistently say they didn’t think they needed a will. Estate planning is critically important to protect you, your family and your hard-earned assets—during your lifetime, in the event of your incapacity, and upon your death.  In addition to having a will, it needs to be findable. The Wall Street Journal says that the biggest estate planning error is simply losing a will. Make sure your family has access to your estate planning documents.
  2. Failing to name and update beneficiaries. An asset with a beneficiary designation supersedes any terms in a will. Review your 401(k), IRA, life insurance, and any other accounts with beneficiaries after any significant life event. If you don’t have the proper beneficiary designations, income tax on retirement accounts may have to be paid sooner. This may lead to increased income tax liability, and the designation of a beneficiary on a life insurance policy can affect whether the proceeds are subject to creditors’ claims.  In many cases where clients tried to avoid probate, one broken beneficiary designation becomes the sole reason to probate the will.

There’s another mistake that impacts people with minor children, which is naming a guardian for minor children and then naming that person as beneficiary of their life insurance, instead of leaving it to a trust for the child. A minor child can’t receive that money. It also exposes the money to the beneficiary’s creditors and spouse.

  1. Failing to consider powers of attorney for adult children. When your children reach age 18, they’re adults in the eyes of the law. If something unfortunate happens to them, you may be left without any say in their treatment. In the event that an 18-year-old becomes ill or has an accident, a hospital won’t consult with their parents if a power of attorney for health care isn’t in place. Unless a power of attorney for property is signed, a parent may not be able to take care of bills, make investment decisions and pay taxes without the child’s signature. This could create an issue when your child is in college—especially if he or she is attending school abroad. It is very important that when your child turns 18 that you have powers of attorney put into place.

If you have any of these estate planning mistakes in your plan, please contact us for a consultation to fix these mistakes for you and your family.

Reference: Fox Business (October 15, 2019) “Here are the top estate planning mistakes to avoid”

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Everyone Needs an Estate Plan!

Everyone should have an estate plan
Every adult needs an estate plan, don’t wait until you have an “estate.”

Every adult, whether we have a lot of property or not, should have an estate plan.  A client once told me they didn’t need a Will because they didn’t have an “estate.”  They thought it meant substantial wealth, but estate planning is much more than that.

As we go through the many milestones of life, it’s important to plan for what’s coming, and also plan for the unexpected, even beyond the finances. An estate planning attorney works with individuals, families and businesses to plan for what lies ahead, says the Cincinnati Business Courier in the article “Estate planning considerations for every stage of life.” For younger families, having an estate plan is like having life insurance: it is hoped that the insurance is never needed, but having it in place is comforting.

For others, in different stages of life, an estate plan is needed to ensure a smooth transition for a business owner heading to retirement, protecting a spouse or children from creditors or minimizing tax liability for a family.

This is by no means an exhaustive list, but here are some milestones in life when you need an estate plan:

Becoming an adult. It is true, for most 18-year-olds, estate planning is the last thing on their minds. However, at 18 most states consider them legal adults, and their parents no longer control many things in their lives. If parents want or need to be involved with medical or financial matters, certain estate planning documents are needed. All new adults need a general power of attorney and health care directives to allow someone else to step in, if something occurs.  Michael Galligan from our office gave a great presentation this summer on this topic.  See here for the video.  https://youtu.be/lZUaMVRRTms  

That can be as minimal as a parent talking with a doctor during an office appointment or making medical decisions during a crisis. A HIPAA release should also be prepared. A simple will should be considered, especially if assets are to pass directly to siblings or a significant person in their life, to whom they are not married.

Getting married. Marriage unites individuals and their assets. In community property states like Texas, it creates the new wrinkle of community property.  For newly married couples, estate planning documents should be updated for each spouse, so their estate plans may be coordinated and the new spouse can become a joint owner, primary beneficiary and fiduciary. In addition to the wills, power of attorney, healthcare directive and beneficiary designations also need to be updated to name the new spouse or a trust. This is also a time to start keeping a list of assets, in case someone needs to access accounts.

If this is not the first marriage, there is an even greater need for an estate plan because there may be children from the prior marriage to plan for.  Remember, your assets don’t go to a surviving spouse just because you are married, so you definitely need an estate plan.

When children join the family. Whether born or adopted, the entrance of children into the family makes an estate plan especially important. Choosing guardians who will raise the children in the absence of their parents is the hardest thing to think about, but it is critical for the children’s well-being. A revocable trust may be a means of allowing the seamless transfer and ongoing administration of the family’s assets to benefit the children and other family members.

Part of business planning. Estate planning should be part of every business owner’s plan. If the unexpected occurs, the business and the owner’s family will also be better off, regardless of whether they are involved in the business. At the very least, business interests should be directed to transfer out of probate, allowing for an efficient transition of the business to the right people without the burden of probate estate administration.  You also want to address these issues.  https://www.galliganmanning.com/the-importance-of-business-succession-planning/

If a divorce occurs. Divorce is a sad reality for more than half of today’s married couples. The post-divorce period is the time to review the estate plan to remove the ex-spouse, change any beneficiary designations, and plan for new fiduciaries. It’s important to review all accounts to ensure that any controlling-on-death accounts are updated. A careful review by an estate planning attorney is worth the time to make sure no assets are overlooked.

Upon retirement. Just before or after retirement is an important time to review an estate plan. Children may be grown and take on roles of fiduciaries or be in a position to help with medical or financial affairs. This is the time to plan for wealth transfer, minimizing estate taxes and planning for incapacity.

In sum, it is important to realize everyone needs to plan.  Don’t wait because you think you don’t need one.

Reference: Cincinnati Business Courier (Sep. 4, 2019) “Estate planning considerations for every stage of life.”

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