Life Insurance with Long Term Care Riders

As conventional LTC policies grow costlier, alternatives have emerged.

Provided by Mike Moffitt

The price of long term care insurance is really going up. If you are a baby boomer and you have kept your eye on it for a few years, chances are you have noticed much costlier premiums for LTC coverage today compared to several years ago. For example, in 2015 the American Association for Long-Term Care Insurance found that married 60-year-olds would pay $2,170 annually to get a total of $328,000 of coverage.1

As CNBC notes, about three-quarters of the insurers that sold LTC policies ten years ago have stopped doing so. Demand for LTC coverage will only grow as more baby boomers retire – and in light of that, insurance providers have introduced new options for those who want to LTC coverage.1

Hybrid LTC products have emerged. Some insurers are structuring “cash rich” whole life insurance policies so you can tap part of the death benefit while living to pay for long term care. You can use up to $330 a day of the death benefit under such policies, with no reduction to the cash value. Other insurance products are being marketed featuring similar potential benefits.2

This option often costs a few hundred dollars more per year – not bad given that level annual premiums on a whole life policy with a half-million or million-dollar payout often come to several thousand dollars. The policyholder becomes eligible for the LTC coverage when he or she is judged to require assistance with two or more of six daily living activities (dressing, bathing, eating, etc.) or is diagnosed with Alzheimer’s disease or some other kind of cognitive deficiency.2

This way, you can get what you want from one insurance policy rather than having to pay for two. Contrast that with a situation in which you buy a discrete LTC policy but die without requiring any long term care, with the premiums on that policy paid for nothing.

The basics of securing LTC coverage applies to these policies. As with a standard LTC policy, the earlier you start paying premiums for one of these hybrid insurance products, the lower the premiums will likely be. You must pass medical underwriting to qualify for coverage. The encouraging news here is that some people who are not healthy enough to qualify for a standalone LTC insurance policy may qualify for a hybrid policy.3

Are these hybrid policies just mediocre compromises? They have detractors as well as fans, and the detractors cite the fact that a standalone LTC policy generally offers greater LTC coverage per premium dollar paid than a hybrid policy. They also cite their two sets of fees, per their two forms of insurance coverage. While it is possible to deduct the cost of premiums paid on a conventional LTC policy, hybrid policies allow no such opportunity.3

Paying a lump sum premium at the inauguration of the policy has both an upside and a downside. You will not contend with potential premium increases over time, as owners of stock LTC policies often do; on the other hand, the return on the insurance product may be locked into today’s (minimal) interest rates.

Another reality is that many middle-class seniors have little or no need to go out and buy a life insurance policy. Their heirs will not face inheritance taxes, because their estates aren’t large enough to exceed the federal estate tax exemption. Moreover, their children may be adults and financially stable themselves; a large death benefit for these heirs is nice, but the opportunity cost of paying the life insurance premiums may be significant.4

Cash value life insurance can be a crucial element in estate planning for those with large or complex estates, however – and if some of its death benefit can be directed toward long term care for the policyholder, it may prove even more useful than commonly assumed.

Mike Moffitt may be reached at 641-782-5577 or mikem@cfgiowa.com.

Website: www.cfgiowa.com

 

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

 Riders are additional guarantee options that are available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing. Guarantees are based on the claims paying ability of the issuing insurance company.

 Life insurance policies contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your financial professional can provide you with costs and complete details.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

Citations.

1 – cnbc.com/2015/08/07/fer-more-products-that-cover-long-term-care-costs.html [8/7/15]

2 – consumerreports.org/cro/news/2015/04/get-long-term-care-from-whole-life-insurance/index.htm [4/16/15]

3 – tinyurl.com/o3ty2j3 [5/4/14]

4 – marketwatch.com/story/hedging-your-bets-on-long-term-care-2013-11-06 [11/6/13]

 

Partnership Plans for Long Term Care

Many states are assisting their residents to buy LTC insurance. 

A helping hand for a pressing need. With the baby boom generation maturing, numerous studies and articles have pointed out the rising need for long term care. Some state governments have directly responded to it.

Now, many states have created partnership programs to encourage their residents to purchase LTC insurance coverage. It only makes sense: if more people opt to privately insure themselves, a state will face less of a burden and less liability when it comes to its own eldercare programs and eldercare costs.

How the partnership plans work. Essentially, these plans provide dollar-for-dollar asset protection when you buy an LTC policy. So for every dollar the policy pays out in benefits, you get an equal dollar amount in asset protection under a state’s Medicaid spend-down regulations.

What does this mean for you? It means that you are able to retain assets you would otherwise have to spend down before you could qualify for state Medicaid benefits.

These partnership plans let you protect an amount of funds equal to the amount the policy pays out in benefits and still qualify for state Medicaid assistance (as long as you have used up all policy benefits and still require long term care).

Typically, Medicaid kicks in only when you are destitute. But with these partnership programs, you don’t have to be destitute to receive state assistance, even if your need for care outlasts your LTC policy benefits.

With these programs in place, LTC insurance seems more and more attractive. That’s important, because it has never seemed as essential as it does today.

 Does your LTC policy qualify for a partnership plan? You should find out if it does. Most LTC policies sold today do qualify for these partnership plans. A key factor is whether a policy has an age-related inflation protection benefit. In these policies, your daily or monthly LTC benefit amount is adjusted upward in response to inflation and increased cost of expenses. With these inflation-adjusted policies, your benefits typically go up each year, but your premiums may not.

There’s really not much incentive for state governments to partner with LTC policyholders whose policies aren’t inflation-adjusted. What would happen is that with each passing year, the odds would rise of the policyholder using up the whole LTC benefit and leaning on a state Medicaid program, so the state would be poised to pick up more and more of the cost of eldercare with the passage of time.

 The Ohio example. Consider the State of Ohio’s Partnership for Long-Term Care Insurance, and the need it meets. In 2007, the average annual cost of a private or semi-private room in a nursing home exceeded $60,000 in Ohio, and the cost for a licensed, Medicare-certified home health aide was nearly $52,000 per year (for 50 hours of care per week).1

Here’s the kind of difference the Ohio partnership plan could make for an Ohio resident. As an hypothetical example, let’s say Mr. and Mrs. Jones in Toledo have a $100,000 LTC policy. Once they use up their $100,000 policy benefit, they have to spend down their assets to $2,250 before they can get state Medicaid benefits. But if they exhaust a $100,000 partnership policy, they can potentially qualify for Medicaid coverage and still hang on to $101,500 of their assets.2

In Ohio, if you bought your current LTC policy after August 12, 2002, your insurer must offer you the choice of exchanging it for a partnership-compatible policy. You have 90 days to decide if you want to do that.3 Ohio also offers state residents free, in-home long term care consultations.

What kind of long term care coverage do you have? Do you have a policy that is eligible for a partnership plan? Do you have any LTC policy at all? It is wise to look into this. It may be essential for your long-range financial well-being. I urge you to speak with a qualified insurance advisor or financial professional today about long term care coverage, and these remarkably useful partnership plans.

This was prepared by Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Mike Moffitt may be reached at ph. 641-782-5577 or mikem@cfgiowa.com

website:  www.cfgiowa.com

Citations. 1 ltc4me.ohio.gov/faq.aspx            [8/08]

2 ltc4me.ohio.gov/faq.aspx [8/08]

3 ltc4me.ohio.gov/faq.aspx [8/08]

Hybrid Insurance Products with Long-Term Care Riders

With the cost of long term care insurance rising, they are gaining attention.

Could these products answer a financial dilemma? Many high net worth households worry about potential long term care expenses, but they are reluctant or unable to buy long term care insurance. According to a 2014 report from the Robert Wood Johnson Foundation, less than 8% of U.S. households have purchased LTCI.1

Long term care insurance (LTCI) policies have a “use it or lose it” aspect of the coverage: if the insured party dies abruptly, all those insurance premiums will have been paid for nothing. If the household is wealthy enough, maybe it can forego buying a LTC policy and absorb some or all of possible LTC costs using existing assets.

Are there alternatives allowing some flexibility here? Yes. Recently, more attention has come to hybrid LTC policies and hybrid LTC annuities. These are hybrid insurance products: life insurance policies and annuities with an option to buy a long term care insurance rider for additional cost. They are gaining favor: sales of hybrid LTC policies alone rose by 24% in 2012, according to the American Association for Long-Term Care Insurance’s 2014 LTCi Sourcebook. Typically, the people most interested in these hybrid products are a) wealthy couples concerned about the increasing costs of traditional LTCI coverage, b) annuity holders outside of their surrender period who need long term care coverage. Being able to draw on LTCI if the moment arises can be a relief.2

They can be implemented with a lump sum. Often, assets from a CD or a savings account are used to fund the annuity or life insurance policy (the policy is often single-premium). In the case of a hybrid LTC policy, the bulk of the policy’s death benefit can be tapped and used as LTC benefits if the need arises. In the case of a hybrid LTC annuity, the money poured into the annuity is usually directed into a fixed-income investment, with the immediate or deferred annuity payments increasing if the annuity holder requires LTC.2,3

What if the annuity or policy holder passes away suddenly, or dies with LTC benefits left over? If that happens with a hybrid LTC policy, you still have a life insurance policy in place. His or her heirs will receive a tax-free death benefit. It is also possible in certain cases to surrender the policy and even get the initial premium back, however you must have a “Return of Premium” rider in place, which comes as an additional cost to the policy. The annuity holder, of course, names a beneficiary – and if he or she doesn’t need long term care, there is still an immediate or deferred income stream from the annuity contract.3

There are some trade-offs for the LTC coverage. Costs of these products are usually defined by the insurer as “guaranteed” – LTCI premiums are fixed, and the value of the policy or annuity will never be less than the lump sum it was established with (though a small surrender charge might be levied in the first few years of the annuity). In exchange for that, some hybrid LTC policies accumulate no cash value, and some hybrid LTC annuity products offer less than fair market returns.4

Tax-free withdrawals may be used to pay for LTC expenses. Thanks to the Pension Protection Act of 2006, the following privileges were granted regarding hybrid insurance products:

*All claims paid directly from appreciated hybrid LTC annuities and hybrid LTC policies are income tax free so long as they are used to pay qualified long term care expenses. In using the cash value to cover LTC expenses, you are not triggering a taxable event.2,4 

*Owners of traditional life insurance policies and annuities are now allowed to make 1035 exchanges into appropriate hybrid LTC products without incurring taxable gains.2

If you shop for a hybrid insurance product, shop carefully. The first hybrid LTC policy or hybrid LTC annuity you lay eyes on may not be the cheapest, so look around before you leap and make sure the product is reasonably tailored to your financial objectives and needs. Remember that annuity contracts are not “guaranteed” by any federal agency; the “guarantee” is a pledge from the insurer. If you decide to back out of these arrangements, you need to know that some insurers will not return your premiums. Also, keep in mind that over the long run, the return on these hybrid products will likely not match the return on a conventional fixed annuity or LTCI policy; actuarially speaking, when interest rates rise there is no incentive for the insurer to adjust the fixed income rate of return in response.2,4

Are hybrid insurance products for you? If you can’t qualify medically for LTCI but still want coverage, they may represent worthy options that you can start with a lump sum. You might want to talk to your insurance or financial consultant about the possibility.

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com

website:  www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

 Life insurance policies contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your financial professional can provide you with costs and complete details.

Fixed annuities are long-term investment vehicles designed for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.

Guarantees are based on the claims paying ability of the issuing company.

Riders are additional guarantee options that are available to an annuity or life insurance contract holder. While some riders are part of an existing contract, many others may carry additional fees, charges and restrictions, and the policy holder should review their contract carefully before purchasing.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

  Citations.

1 – rwjf.org/content/dam/farm/reports/issue_briefs/2014/rwjf410654 [2/14]

2 – forbes.com/sites/jamiehopkins/2014/04/21/new-and-unexpected-ways-to-fund-long-term-care-expenses/ [4/21/14]

3 – fa-mag.com/news/hybrid-ltc-insurance-gains-traction-among-the-affluent-17070.html [2/25/14]

4 – kitces.com/blog/is-the-ltc-cost-guarantee-of-todays-hybrid-lifeltc-or-annuityltc-insurance-policies-just-a-mirage/ [10/16/13]

The Right Beneficiary

Who should inherit your IRA or 401(k)? See that they do.

Here’s a simple financial question: who is the beneficiary of your IRA? How about your 401(k), life insurance policy, or annuity? You may be able to answer such a question quickly and easily. Or you may be saying, “You know … I’m not totally sure.” Whatever your answer, it is smart to periodically review your beneficiary designations.

Your choices may need to change with the times. When did you open your first IRA? When did you buy your life insurance policy? Was it back in the Eighties? Are you still living in the same home and working at the same job as you did back then? Have your priorities changed a bit – perhaps more than a bit?

While your beneficiary choices may seem obvious and rock-solid when you initially make them, time has a way of altering things. In a stretch of five or ten years, some major changes can occur in your life – and they may warrant changes in your beneficiary decisions.
In fact, you might want to review them annually. Here’s why: companies frequently change custodians when it comes to retirement plans and insurance policies. When a new custodian comes on board, a beneficiary designation can get lost in the paper shuffle. (It has happened.) If you don’t have a designated beneficiary on your 401(k), the assets may go to the “default” beneficiary when you pass away, which might throw a wrench into your estate planning.

How your choices affect your loved ones. The beneficiary of your IRA, annuity, 401(k) or life insurance policy may be your spouse, your child, maybe another loved one or maybe even an institution. Naming a beneficiary helps to keep these assets out of probate when you pass away.

Beneficiary designations commonly take priority over bequests made in a will or living trust. For example, if you long ago named a son or daughter who is now estranged from you as the beneficiary of your life insurance policy, he or she is in line to receive the death benefit when you die, regardless of what your will states. Beneficiary designations allow life insurance proceeds to transfer automatically to heirs; these assets do not have go through probate.1,2

You may have even chosen the “smartest financial mind” in your family as your beneficiary, thinking that he or she has the knowledge to carry out your financial wishes in the event of your death. But what if this person passes away before you do? What if you change your mind about the way you want your assets distributed, and are unable to communicate your intentions in time? And what if he or she inherits tax problems as a result of receiving your assets? (See below.)
How your choices affect your estate. Virtually any inheritance carries a tax consequence. (Of course, through careful estate planning, you can try to defer or even eliminate that consequence.)

If you are simply naming your spouse as your beneficiary, the tax consequences are less thorny. Assets you inherit from your spouse aren’t subject to estate tax, as long as you are a U.S. citizen.3

When the beneficiary isn’t your spouse, things get a little more complicated for your estate, and for your beneficiary’s estate. If you name, for example, your son or your sister as the beneficiary of your retirement plan assets, the amount of those assets will be included in the value of your taxable estate. (This might mean a higher estate tax bill for your heirs.) And the problem will persist: when your non-spouse beneficiary inherits those retirement plan assets, those assets become part of his or her taxable estate, and his or her heirs might face higher estate taxes. Your non-spouse heir might also have to take required income distributions from that retirement plan someday, and pay the required taxes on that income.4

If you designate a charity or other 501(c)(3) non-profit organization as a beneficiary, the assets involved can pass to the charity without being taxed, and your estate can qualify for a charitable deduction.5

Are your beneficiary designations up to date? Don’t assume. Don’t guess. Make sure your assets are set to transfer to the people or institutions you prefer. Let’s check up and make sure your beneficiary choices make sense for the future. Just give me a call or send me an e-mail – I’m happy to help you.

Michael Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com
website: www.cfgiowa.com

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – smartmoney.com/taxes/estate/how-to-choose-a-beneficiary-1304670957977/ [6/10/11]
2 – www.dummies.com/how-to/content/bypassing-probate-with-beneficiary-designations.html [1/30/13]
3 – www.nolo.com/legal-encyclopedia/estate-planning-when-you-re-married-noncitizen.html [1/30/13]
4 – individual.troweprice.com/staticFiles/Retail/Shared/PDFs/beneGuide.pdf [9/10]
5 – irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Estate-Taxes [8/1/12]

How LTC Insurance Can Help Protect Your Assets

Create a pool of healthcare dollars that will grow in any market.

How will you pay for long term care? The sad fact is that most people don’t know the answer to that question. But a solution is available.
As baby boomers leave their careers behind, long term care insurance will become very important in their financial strategies. The reasons to get an LTC policy after age 50 are very compelling.
Your premium payments buy you access to a large pool of money which can be used to pay for long term care costs. By paying for LTC out of that pool of money, you can preserve your retirement savings and income.
The cost of assisted living or nursing home care alone could motivate you to pay the premiums. AARP and Genworth Financial conduct an annual Cost of Care Survey to gauge the price of long term care. The 2008 survey found that
• The national average annual cost of a private room in a nursing home is $76,460 – $209 per day, and 17% higher than it was in 2004.
• A private one-bedroom unit in an assisted living facility averages $36,090 annually – and that is 25% higher than it was in 2004.
• The average annual payments to a non-Medicare certified, state-licensed home health aide are $43,884.1
Can you imagine spending an extra $30-80K out of your retirement savings in a year? What if you had to do it for more than one year?
AARP notes that approximately 60% of people over age 65 will require some kind of long term care during their lifetimes.2
Why procrastinate? The earlier you opt for LTC coverage, the cheaper the premiums. This is why many people purchase it before they retire. Those in poor health or over the age of 80 are frequently ineligible for coverage.
What it pays for. Some people think LTC coverage just pays for nursing home care. Not true: it can pay for a wide variety of nursing, social, and rehabilitative services at home and away from home, for people with a chronic illness or disability or people who just need assistance bathing, eating or dressing.3
Choosing a DBA. That stands for Daily Benefit Amount, which is the maximum amount your LTC plan will pay for one day’s care in a nursing home facility. You can choose a Daily Benefit Amount when you pay for your LTC coverage, and you can also choose the length of time that you may receive the full DBA every day. The DBA typically ranges from a few dozen dollars to hundreds of dollars. Some of these plans offer you “inflation protection” at enrollment, meaning that every few years, you will have the chance to buy additional coverage and get compounding – so your pool of money can grow.
The Medicare misconception. Too many people think Medicare will pick up the cost of long term care. Medicare is not long term care insurance. Medicare will only pay for the first 100 days of nursing home care, and only if 1) you are receiving skilled care and 2) you go into the nursing home right after a hospital stay of at least 3 days. Medicare also covers limited home visits for skilled care, and some hospice services for the terminally ill. That’s all.2
Now, Medicaid can actually pay for long term care – if you are destitute. Are you willing to wait until you are broke for a way to fund long term care? Of course not. LTC insurance provides a way to do it.
Why not look into this? You may have heard that LTC insurance is expensive compared with some other forms of policies. But the annual premiums (about as much as you’d spend on a used car from the mid-1990s) are nothing compared to real-world LTC costs.4 Ask your Cornerstone Financial Group advisor about some of the LTC choices you can explore – while many Americans have life, health and disability insurance, that’s not the same thing as long term care coverage.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Michael Moffitt contact information is as follows: Phone 641-782-5577, email mikem@cfgiowa.com, website cfgiowa.com

This was prepared by Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.

Citations.
1 aarp.org/states/nj/articles/genworth_releases_2008_cost_of_care_survey_results.html [4/29/08]
2 aarp.org/families/caregiving/caring_help/what_does_long_term_care_cost.html [11/11/08]
3 pbs.org/nbr/site/features/special/article/long-term-care-insurance_SP/ [11/11/08]
4 aarp.org/research/health/privinsurance/fs7r_ltc.html [6/07]

Why the National Debt is Higher Than You Think

We all can recite some of the biggest accounting scandals in history.  Lehman Brothers, Enron, and AIG all come to mind. Each of their accounting “practices” lost their investors money. But would you believe that our government is also using accounting tactics to make the deficit appear smaller than it really is?

According to a recent report by USA Today the US government reports that the federal deficit is at $1.3 trillion. However, those calculations do not include liabilities for retirement programs such as Social Security and Medicare. Those two liabilities alone rose $3.7 trillion in just the last year.

So, how can the federal government make such a large discrepancy in the national debt? Congress actually exempts itself from having to include retirement liabilities in its debt projections. Yet all other business-like entities including corporations and state and local governments are required by law to report their retirement liabilities on their financial statements.

What does this mean for younger workers?  You may not believe that this will have an effect on you but if you’re not yet retired, it may.  There is a chance that the government may increase taxes and/or decrease retirement benefits in the years ahead out of necessity. If tomorrow, Congress passes a law that increases taxes by 15% to try and get the deficit under control, would you feel comfortable in your current financial situation?  Consider that question carefully as the deficit continues to grow.

June 2012- Parents, Alzheimers, and Money

Every eighth American aged 65 and older has Alzheimer’s disease, and 43% of Americans aged 85 and older have it, according to the Alzheimer’s Association. Consider those percentages in light of the Social Security Administration’s estimate that about 25% of today’s 65-year-olds will live past age 90. These shocking statistics have serious implications for family wealth.1,2

Your choices. What are your options when it comes to helping a parent out with money management? Informally, you can “lend a helping hand” and check in with mom and dad to make sure that bills and premiums are paid, and deadlines are met. But if you elect to formally take the financial reins, you are looking at a two-phase process:

* You can get a power of attorney and assume some of the financial responsibilitiesA power of attorney is a detailed and strictly constructed legal document that gives you explicitly stated measures of financial authority. If you try to handle financial matters for your parent(s) without a valid power of attorney, the financial institution involved may reject your efforts.3

durable power of attorney lets you handle the financial matters of another person immediately. The alternative – a springing power of attorney – only takes effect when a medical diagnosis confirms that person’s mental incompetence. Copies of the power of attorney should be sent to any financial institution at which your parents have accounts or policies.It may be wise to get a durable power of attorney before your parent is unable to make financial decisions; many investment firms require the original account owner to sign a form to allow another party access to an account owner’s invested assets.4

  • You are going to have to hunt for information, such as…
  • – Where mom or dad’s income comes from (SSI, pensions, investments, etc.)
  • – Where the wills, deeds and trust documents are located.
  • – Who the designated beneficiaries are on insurance policies, IRAs, etc.
  • – Who the members of mom or dad’s financial team or circle are. You need to talk with them; they need to talk with you.
  • – The crucial numbers: checking and savings accounts, investment accounts, insurance policies, PIN numbers and of course Social Security numbers.
  • – It will also help to learn about their medical history and prescriptions.

If the disease progresses to the point where your mom or dad can’t make competent financial decisions, then you are looking at a conservatorship. In that case…

*You can act to become your mom or dad’s conservator. This means going to probate court. You or your parent can initiate a request for conservatorship with a family law attorney; if the need is more immediate, you or your family’s attorney may petition the court. In either case, you will need to show documentation that your parent is no longer financially competent. You must provide medical documentation of his or her dementia to the court as well

The court will interview the involved parties, look at the documentation and perform a background check on the proposed conservator. This is all pursuant to a hearing at which the court presents its decision. If conservatorship is granted, the conservator assumes control of some or all of the protected party’s income and assets.5

How do conservatorships differ from guardianships? A guardianship gives a guardian control over many aspects of a protected person’s life. A conservatorship limits control to the management of the protected person’s assets and financial affairs.5

What if I don’t want to assume this kind of responsibility? Some wealth management firms offer daily money management as an option in a “family office” suite of services. The firms make home visits to help with bill paying, filing medical claims and other recurring tasks; carefully scrutinize anyone offering this service. (Visit aadmm.com for the American Association of Daily Money Managers.)6

The other choice is to give a relative, a financial services professional, or a family lawyer durable or springing power of attorney or limited or full conservatorship. Such a decision must not be made lightly

Keep your parents away from unprincipled people. These steps may prove essential, yet they will not shield your family from scam artists. Be on the lookout for new friends and acquaintances. If your instincts tell you something is wrong, investigate.

CITATIONS:

1 – www.alz.org/downloads/facts_figures_2011.pdf [2011]
2 – money.usnews.com/money/blogs/planning-to-retire/2010/07/22/predicting-your-own-life-expectancy [7/22/12]
3 – www.law-business.com/powers-of-attorney [4/27/12]
4 – http://www.kiplinger.com/magazine/archives/managing-your-parents-money.html [4/27/12]
5 – dhs.sd.gov/gdn/guardianshipfaqs.aspx [6/2/12]
6 – www.smartmoney.com/retirement/planning/talking-to-mom-about-alzheimers-and-her-money-1335192298522/ [5/7/12]
DISCLOSURE:
This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice. The publisher is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional.

Deficit Won’t Go Away Without Major Changes

I’ve been watching with interest the federal government’s struggle with the budget process and how to reduce the deficit.  I look at it from a logical standpoint.  David Walker the former US Comptroller General of the Government Accountability Office, has presented the facts succinctly for many years.  Bottom line: without big changes, entitlements (Social Security, Medicare and Medicaid) will occupy the entire federal budget Walker says “the survival of the republic is at stake.” You can watch the video in it’s entirety below.

He says by 2040 the government will only have enough money to pay interest on the federal debt and some entitlements – nothing else.  Not defense, not education, not homeland security.