 Every day I hear stories or talk to folks who were doing just fine, thinking they had a firm plan in place for their future, until someone (typically a spouse or a parent) gets sick. As the illness continues, now faced with long-term care expenses, they realize their ‘plan’ did not include nearly enough to keep up with the ever-increasing health care costs.
“How will we pay for this?” Is the number one question I hear regarding long-term care. Long-term care costs have two components, the nursing home, assisted living, or living situation, and the indirect component, the unpaid caregiving. The people who come in to help you, your family members, or the things that long-term care insurance doesn't cover. Did you know over $500 billion a year is spent in ‘unpaid’ caregiving in this country? And these costs get higher every year.
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 Many people put off creating a long-term-care plan, yet half of people turning age 65 will require some type of long-term care in their lifetimes. On average women will need 2.5 years of care, while men will need an average of 1.5 years. The cost of nursing-home care in a private room has passed the $100,000/year mark, and in major urban areas, the cost of care can run much higher.
 According to a recent article from CNBC one of the great dilemmas facing most retirees is paying for the costs of long-term care. As the CNBC article, written by reporter Sarah O’Brien, points out, part of what makes this such a troubling issue for today’s seniors is that no one can say for certain who will have to pay for long-term care, or how much, or for how long. Planning ahead is the key. You don’t have to be a victim of ill health, bad planning, or economic setback, because with a well-crafted plan you and your loved ones should be able to navigate the road to retirement with your dignity and your well-earned resources.
The Burden of Paying for Long-Term Care Will Affect the Majority of Retirees “There’s an expense lurking down the road for many retirees that is largely unpredictable but likely: long-term care,” says the CNBC article. “Someone turning 65 today faces a nearly 70 percent chance of needing LTC services during their remaining years.” But as premiums on long-term care insurance policies continue to rise, financial advisors are looking at other strategies to help their clients prepare for a day when they can no longer live independently. As one planner told CNBC, “We’re a country that excels at prolonging and extending life. The result is that the costs of care later in life, and the duration of the care, are lasting longer and longer.” On average, once they start needing long-term care, women tend to need these services longer than men – 3.7 years for mom compared with just over 2 years for dad. But no matter how long the bills keep coming, the monthly costs can be “eye-popping,” according to CNBC. The nationwide median cost for care at an assisted-living facility is $4,000 per month, compared with $4,200 for a home health aide. If a senior needs care in a skilled nursing facility, the median cost for a shared room nationwide is $7,400 per month, or nearly $90,000 per year. Here in the Pacific Northwest, those costs are usually much higher, depending on the quality of the facility. That’s why one planner, in a remarkable example of understatement, told CNBC’s O’Brien, “Without planning, long-term-care costs can be a big financial hit.” The Burden of Paying for Long-Term Care Can Occur at Varying Stages of Life According to statistics from the American Association for Long-Term Care Insurance, fewer than 5 percent of LTC claims are initiated at age 70 or younger. About one-quarter of all claims begin when a senior is in their 70s, and by the time we enter our 80s the likelihood really climbs. Another one-quarter of all claims for long-term care start when a policyholder is between 81 and 85, and an even higher number when the individual is 86 or older – the age when about 45 percent of LTC claims are initiated. To financial advisers, that means their clients face an uncertain and unpredictable timeline for long-term care. Advisers are faced with the challenge of gauging “the probability of a particular client needing care eventually — genetics and lifestyle can factor in — and evaluating available resources to recommend an option,” says CNBC. For most retirees, the choice comes down to two broad-brush alternatives: either they purchase some form of insurance, or else they self-insure, planning to rely on their own assets to fund long-term care costs. “Other options,” says CNBC, “include leaning on family members or spending down (or shielding) assets to qualify for Medicaid-sponsored nursing-home.” Advisers quoted in the article suggest that people in their 60s today who have roughly $3 million to $5 million in liquid assets are the best candidates to self-insure since income from those assets should cover LTC costs when and if required. As for buying coverage, the solution that CNBC calls “the most straightforward” – a traditional long-term care insurance policy – is too pricey for many middle-income retirees, “contributing to a 60 percent drop in sales since 2012.” As the article adds, “With claims exceeding expectations, many [LTC] insurers also have fled the space” and stopped selling policies altogether. A Hybrid Life Insurance and LTC Policy May Be Right for You Another option some advisors recommend is a relatively new hybrid policy that combines life insurance with LTC coverage. “While the particulars of each policy vary,” says the CNBC report, “the idea is that you can tap the death benefit during your lifetime if you need it to pay for long-term care,” although “doing so reduces the amount that your heirs would inherit.” The chief drawback, however, is up-front cost. “You typically need a pot of money to fund it. Some insurers ask for an upfront lump sum, while others allow you to spread the premium payments over a set number of years.” Even though some advisers quoted by CNBC expressed skepticism about the sustainability of the so-called hybrid model, these policies do seem to be gaining in popularity with consumers, with sales up 5 percent in 2018 compared with 2017. For Today and Tomorrow, Planning is the Essential Here at Tacoma Elder Care we partner with some great folks in the Puget Sound area who can help you navigate some of these financial concerns. Such as Banker’s Life in University Place, WA. We encourage you to begin the planning process by attending one of our FREE workshops, where you’ll learn about the documents you’ll need to have in place as the cornerstone of your Plan. After that we can help you navigate what else you will need, depending on your personal situation and resources. Remember, having no plan, is a plan – a bad one! Contact Bob Michaels of Smith Alling in Tacoma, WA, today for a FREE consultation, or attend one of Tacoma Elder Care’s FREE Workshops where you can learn more about how to get Your Plan under way!  A big question for boomers without children (Solo Agers) is, what happens when I am no longer physically or mentally able to make decisions for myself?
Decisions have to be made to create documents such as an advance health care directive or durable power of attorney for health care (also known as a “living will”); a durable power of attorney for finances and a last will and testament. The act of creating them will force you to survey your support system and determine who you want to make decisions for you if you are physically and/or mentally unable to make them for yourself. When You Don’t Have a Someone to Make Decisions for You If you become incapacitated and you have not executed these documents, a court judge will put your case into a conservatorship and will appoint someone (a conservator or guardian) to make decisions on your behalf, basically a “paid guardian.” The court may not appoint the person you would have selected, especially if they are not related to you or named in any document. The decisions the conservator makes for your care may be totally different from what you would have chosen for yourself. No matter how vehemently your loved ones argue on your behalf, the conservator will make decisions independently, or in conjunction with a court judge — based on their own belief system and preferences. Who Could Be Your ‘Agent’? If you are married or have a life partner, you will likely select your spouse/partner as the primary “agent” or appointee for your health care decisions. Your attorney will strongly encourage you to name at least one other person, and even a third, in case your spouse or partner and the first designee predecease you or becomes incapacitated. Singles should also name secondary agents in their planning. If you come from a large family and are close to your siblings and their children, you have the advantage of a long-term, well-known support system. Your job will be to choose the ones you are closest to or the ones you see as the most stable, adding them as agents in you documents and having a discussion with them about what you have done and what you expect of them. On the other hand, what if you do not have a large or close family? What if your family members have values so different from yours that you would rather not name any of them as your agent? In that case you will need to select among your friends, which can be challenging if all your friends are around your same age. If you are among the many child-free boomers who have spent their entire lives associating with like-minded, like-aged people, now is the time to look outside your comfort zone. You may know some younger people, but how do you go from knowing who they are to becoming close enough to ask them to be an agent on one or more of your estate and long-term planning documents? Even though most of your wishes will be spelled out in the documents already mentioned, only with familiarity and a true friendship will they feel confident having your power of attorney and believing they understand your values and what you want in your oldest years. Hire a Professional If you are still uneasy about whom you could name as your agent, you may want to consider a professional to take over your affairs and your decision-making if you become incapable of doing so yourself. Today, an increasing number of forward-thinking people are being proactive in seeking out a professional private guardian — someone they have met and with whom they are comfortable — to take over their affairs if they become unable to care for themselves and manage their lives in a safe and secure manner. A professional guardian is an individual who assumes a position of responsibility and trust over the affairs of a person who can no longer act in their own behalf. Often appointed by probate court, the professional guardian is charged with the responsibility of managing many of the day- to-day affairs of individuals who can no longer do so for themselves. Being a competent professional guardian is a complex job and may require expertise in the law, accounting, real estate, taxes, and more. You will want to consider whom you trust to make these kinds of arrangements for you on an ongoing basis, potentially for months or years. If you have a family member or friend you think would perform these duties for you, it’s best to have a conversation with them in advance to make sure they are willing and able. Choosing the Right Guardian or Fiduciary If the idea of giving your power of attorney to a professional guardian appeals to you, take time to do some research and be selective about whom you engage for this role. Consider interviewing several individuals. Select the one with whom you feel the most comfortable (and whose references are impeccable). You can then name the person to act as your agent to manage your estate and your personal affairs, as well as make medical and care decisions should you become mentally or physically incapacitated. This person will become the “agent” in your durable power of attorney and/or your advance health care directive documents. You can appoint him or her as a co-agent with a friend or relative you trust. Some of the questions you will want to ask your potential guardian or fiduciary are the following:
The Exception: Dementia You should be the one to decide what you are ready to turn over. The one exception is signs of dementia. You must understand that anyone who interacts with you on a regular basis may recognize this, contact others who care about you and together, with your best interests in mind, ask your primary care physician to provide the signature to have you placed under the full care of the guardian or fiduciary you have named in your legal documents. Fees and Meetings with Your Guardian or Fiduciary Guardians and fiduciaries charge by the hour. They get paid when their services are needed. Since most of their time is back-end loaded, their fees will come out of your estate at the time they become active as your agent. However, it’s advised that you meet for a yearly meeting, so they can get to know. The better they know you, the more confident they will feel that your needs are being met by their decisions and the more confident you will feel that they will make the right decisions for you. How to Find One Finding a professional guardian or fiduciary should not be difficult if you approach the search in the same way you would if you were looking for a competent doctor or dentist. Start by asking people you know. Other good sources are the National Guardianship Association and the Professional Fiduciary Associations in states where fiduciaries are licensed. Here at Tacoma Elder Care we can make some excellent recommendations. At Tacoma Elder Care, we are always working on ways to help you. If you are just beginning to think about your planning, we highly recommend attending one of our FREE workshops to learn more about how to start, and the most important documents everyone needs to have in place. Contact us today to register, or to schedule a FREE consultation.  A long life is a great gift, but with the joys come some financial and legal challenges. The earlier you act to address them, the better off you and your heirs will be.
Did you know that a non-smoking 65-year-old woman today has a 50% chance of living until 88? A non-smoking 65-year-old man has a 50% chance of living until 85. That’s how life expectancy works – the longer you live, the more likely you will live longer! Given that you could be well on your way to becoming a nonagenarian, here are four smart moves to help keep you and your family protected as you age: 1. Consider long-term care For a married couple, on average, it's likely that one spouse will end up in a nursing home. The time to think about how to pay for long-term care is well before you ever need it. Consider purchasing long-term care insurance while you’re still healthy enough to qualify, so you don’t have to use your own money to pay for your care. Long-term care insurance typically pays for both skilled nursing home care and in-home health care aides. Traditional long-term care policies can be expensive and difficult to obtain, but there are hybrid policies that combine long-term care benefits with life insurance. If you don’t use the long-term care benefits during your life, your loved ones can receive the life insurance proceeds upon your death. The death benefits take away the worry that you’ll pay premiums and never receive benefits. It’s also possible that married couples can be covered under one policy, providing a pool of benefits available to the spouse who needs them, while at the same time helping protect the inheritance of your loved ones. 2. Plan for incapacity Many people believe that their spouse has the automatic ability to make medical and financial decisions for them in the event they become incapacitated. Many times, however, this is not case. Not preparing for this possibility can take a financial and emotional toll on your family. Medical advance directives, such as health care proxies and health care powers of attorney, allow you to name another person to make your medical decisions when you are no longer able. If you become incompetent and do not have a medical advance directive, your family may need to go to court to get authority to make these decisions for you – this is known as a guardianship proceeding, which is expensive and invasive of your privacy. The same is true for financial decisions. You need a durable power of attorney for financial and legal decisions so that someone else can sign on your behalf and access your accounts if you are not able to. 3. Avoid probate When you die if you have assets in your sole name (without a joint owner or beneficiary), your loved ones will need to go to court to get access. This is known as probate, and it can be a very costly and timely process. Probate can cost between a few thousand and many thousands of dollars depending on where you live. In probate it can also take anywhere from a few weeks to many months to access assets. Revocable trusts can help avoid probate by owning assets in the name of the Trust. The Trust can own many of your assets during your life and say what you want to happen to your assets after you pass. In this manner, the Trust helps avoid probate and essentially acts like your will. (Note that you should also have a will in case you miss putting some of your assets into your Trust.) Using a revocable trust can help you and your family save time and money. 4. Minimize taxes Under the Tax Cuts and Jobs Act passed at the end of 2017, federal estate taxes no longer apply if you own assets totaling less than $11.2M. (Note, this amount is scheduled to decrease to about half that amount after 2025.) Even though the vast majority of people no longer need to be concerned about federal estate taxes, there are other taxes that you should worry about – namely state estate and inheritance taxes and capital gains taxes. An attorney experienced in estate planning can help you minimize, or possibly avoid, these state estate taxes. Estate planning techniques such as credit shelter trusts, giving assets away during your life, or even changing the state in which you live, can help minimize the impact of these taxes. In addition, if you have highly appreciated assets, it may be best to avoid giving those away during your life. If you give those appreciated assets to your children while you’re alive, and your children sell them later, they will have to pay the capital gains taxes. You children will receive your tax-basis, under “carry-over basis” rule. If, however, you own those same assets when you die, the basis will become the fair market value (under the “step-up in basis” rule), and your children will not pay capital gains taxes. Again, these rules and planning techniques can be complicated, so it’s always best to consult a professional. Oftentimes people put off planning for their golden years because no one likes to think about dying or the possibility that their quality of life in their final years will not be the same as it is in the present. But planning for longevity is important. It will give you peace of mind and give your family a sense of security so that you can spend your time doing the things you enjoy and not worrying about the future. At Tacoma Elder Care, we are always working on ways to help you. If you are just beginning to think about your planning, we highly recommend attending one of our FREE workshops to learn more about how to start, and the most important documents everyone needs to have in place. Contact us today to register, or to schedule a FREE consultation.  A friend of mine recently told me that their financial adviser recommended they buy a long-term care insurance policy to cover the cost of nursing home care in case they need it as they grow older. This seemed like good advice, until they realized that the premiums were - expensive.
This is always a difficult topic, and to be honest, everyone has a different point of view. Statistically, after age 65, most of us may need caregiving services at some point. No one really wants to think about this, and we all say, “it will never happen to me.” What we don’t consider, is that it absolutely could happen to you, and someone will need to pick up the bill. Currently, the cost of caregiving can run as low as $2,500 to more than $10,000 per month. For at home care, it’s approximately $30 per hour. These costs get higher every day. So, if you’re 55 now, just imagine what they will be when you’re 75. Unfortunately, there are only three ways to pay for long term care:
Which is why many financial advisers will recommend that a long-term care insurance policy should be part of your retirement plan. The good news is that you can still find an affordable policy up to 65, but after that it starts to get expensive. There are some other options to consider, and depending on your situation, you may be able to find less expensive alternatives. The key is to start planning as early as possible, so that you can be prepared. Where we see the greatest costs are when someone has no plan in place, and unexpected situations arise. Come to one of our FREE workshops to learn more about long-term care options, and much more. You can register HERE. Or call to schedule a FREE consultation. |
