Nearly 1 in 2 seniors will become incapacitated before they die, putting their family and their finances at risk. There are steps families can take to guard against all-too-common problems, including devastating long-term care costs, children’s divorces, and the time and expense of probate.
So often when people consider estate planning, they only answer the question of “What if I die?” But what concerns so many people and is overlooked by traditional estate planning is the question of, “What if I don’t die?” In other words, what will happen if you’re happily walking through life…then one day you have an accident or suffer a stroke or other disabling injury or disease that leaves you alive but mentally incapacitated?
That sort of event leaves you no time to plan. You either have a good plan in place, or your family is left in limbo to pick up the pieces and hope for the best.
Of course you may never face the kind of catastrophic event that changes your life instantly like a stroke can. But what if Alzheimer’s or Parkinson’s or dementia or some other disabling disease robs you or your spouse of the ability to make decisions? If that happens, you can make life better for yourself and your family by planning ahead when you get the diagnosis rather than waiting until the disease takes its toll. By acting early, you gain valuable years of planning time and you don’t risk losing the ability to sign important planning documents as your disease progresses and gets worse.
Long-term care planning makes certain that you have a plan for incapacity. Among other issues, your long-term care plan needs to address these three primary questions:
- Who will make decisions for you if you can’t?
- How can you make things easier for your family?
- Will you have to spend all of your money for your care costs?
With the costs of nursing homes over $75,000 per year, many people who fail to plan find themselves out of money. If you need want home care and need to pay privately for that, the cost is even higher: easily $10,000 to $15,000 per month! Fortunately, there are steps that can be taken to protect assets under the Medicaid laws, through irrevocable trusts and understanding how the Medicaid rules work.
Families with substantial resources may not have to worry about running out of money, because they can afford to pay privately for these cost for many years. For those families, it makes sense to set aside a portion of their investments in a way that can grow and continue to pay interest through an income-only irrevocable trust. That can help ensure that even if they pay for care for many years, that there still will be some money set aside.
Particularly important for a healthy vigorous senior with substantial savings is how to leverage existing wealth so that if it become necessary to pay for long-term care costs, that you can pay for with insurance. With the right planning that means you get a discount on your long-term care. In effect, that lets you pay less than a dollar to get a dollar’s worth of care. But you have to be healthy enough to qualify for these types of financial products designed to address concerns about traditional long-term care insurance. Many of these plans will allow you to get extra money for care if needed during your lifetime; but if you never need care or only need care for a brief period of time then your family will receive a death benefit under the policy.
Estate planning today needs to encompass more than ever before. Your goal is to never be out of money and so never out of qualify health care options before your’e out of breath. You may also want to leave as much of your life’s savings to your loved ones as possible, with the least amount of tax, delay, excess cost, and red tape.
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