Difficult Discussions

     Have you ever noticed that some discussions are easier to initiate than other discussions? Interestingly, some of the most difficult discussions are with members of our own family. Perhaps you can recall a few important discussions you have had with your parents, your spouse or your children. Some of the topics for discussion can be rather embarrassing to initiate...by either party.
     This article will review one topic that every family needs to discuss sooner, rather than later. So, what is this topic? It is estate planning.

The Challenge

     Have you had a frank discussion with your family members about your wealth and your eventual post-mortem plans for it after you are gone? Family members seem to avoid discussions about their personal wealth, whether it is substantial or modest. For example: If you have adult children, do they understand the how much they may inherit, the when the inheritance may be distributed to them and the why they may be treated differently than their siblings regarding their inheritance? If your children do not understand now, then how will you prevent misunderstandings after you are gone?
     A recent survey, conducted by the AARP/Scudder Investment Program, found that the failure to have this difficult discussion could trigger family fall-outs in the future. The survey of Americans age 50 and over discovered that 20% of the respondents experienced family fights over inheritance issues. However, of the respondents reporting no conflicts, 63% said they had known what to expect in advance and 82% of them believed they were treated fairly.
     These survey results, together with abundant anecdotal evidence, clearly underscore the benefits of discussing difficult inheritance issues with your loved ones. Nevertheless, you should address other related issues to avoid unexpected problems.

Incapacity Fiduciaries

     As part of your difficult discussions, be sure to address your plans for avoiding an expensive and embarrassing court process in the event of your incapacity. Let your family know who will be making your personal, health care and financial decisions when you cannot, due to an injury or illness. Will it be one or more family members, third-party professionals, or maybe a combination of the two? While you are at it, be sure to discuss the game plan to handle your potential Long-Term Care needs, including how you plan to pay for it!

Post-Mortem Fiduciaries

     The reality of death can be emotionally and even physically traumatic for the loved ones you leave behind. Even so, many financial and non-financial matters must be resolved promptly and correctly. For instance, final expenses, bills and taxes will not wait to be paid.
     Your family should know today whom the go-to person or institution would be when the time comes. Do they? This will eliminate any unnecessary surprises and hurt feelings. In addition, such advance notice will give your loved ones time to become acquainted with the post-mortem fiduciaries (e.g. personal representatives and trustees) you have selected, especially if they are third-party professionals. Similarly, any non-professionals you may have appointed will have time to prepare for their future duties.

The Treasure Hunt

     Were you incapacitated (or worse) today, who would know where you keep all of your important financial and legal papers? Have you created an inventory of your assets? Have you reviewed and recorded the ownership arrangements, as well as the beneficiary designations, regarding these assets? Are the titles and designations current? Will your final legacy to your family include an unpleasant Treasure Hunt through your various papers and effects? To make matters worse, how will they know when the Treasure Hunt is completed?
     A little bit of time identifying, organizing, valuing and updating your asset inventory now will pay big dividends when your incapacity or post-mortem fiduciaries assume their responsibilities. [Note: During an asset inventory, more that one person has discovered that an ex-spouse is still an unintended co-owner or beneficiary of their assets.]

Conclusion

     Like most things in life, prior planning is the key to success. However, when it comes to your estate plan, proper planning and open communication today are essential for family harmony later.

Long Term Care

     Do you have a plan for your Long-Term Care? Will you end up in a nursing home and outlive or severely deplete your financial resources? Too often people avoid facing the reality of the Long-Term Care threat, avoid taking action while they still can and avoid communicating their Long-Term Care game plan to their loved ones. This article addresses the topic head-on, reviewing the facts and the insured solution.

The Facts

     The odds of falling prey to Long-Term Care are staggering. There is a 43% chance that someone age 65 or older will eventually enter a nursing home during their lifetime.¹ Most of these nursing home stays will last about 2½ years² -- and such care is not cheap. A year in a nursing home averages more than $40,000, and can exceed $100,000 in some parts of the country.³
     Unfortunately, many Americans hold the mistaken belief that Medicare and Medicare Supplemental Insurance will cover their Long-Term Care expenses. At best, Medicare will pay for all or part of the first 100 days of care. That is all. The lion's share of all Long-Term Care costs is paid from the assets of individuals needing the care. Once those assets are spent down to the defined poverty levels for their state, such individuals may qualify for Medicaid...the government welfare program. Against this backdrop, is it any surprise that Long-Term Care Insurance is the fastest growing type of insurance purchased in this country?⁴

LTC Insurance

     With the odds better than 2 in 5 that you will need Long-Term Care and spend about $40,000 per year for 2½ years, the need for Long-Term Care Insurance (LTCI) is obvious. In fact, for most married couples, Long-Term Care expenses of $200,000 (i.e. $100,000 per spouse) can quickly drain their cash assets and even require liquidation of non-cash assets just to pay for their care. Fortunately, an appropriate LTCI policy can be designed to fit almost any budget. Most LTCI policies share some common features you should know, to include the following:

• Benefit Amount: How much will the policy pay?
• Benefit Triggers: When will the policy pay benefits?
• Inflation Protection: Will the purchasing power of the Benefit Amount increase?
• 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 before you sign on the dotted line. [Note: There are over 100 companies selling LTCI.⁵] 

Summary

     The scope of insurance options available for your Long-Term Care protection extends well beyond this brief overview. You should seek competent legal counsel to interpret the contractual provisions of any LTCI policy before submitting an application for coverage.

¹ Working Woman (September, 1997)
² The Boston Globe (May 12, 1997)
³ The Wall Street Journal (March 31, 1999)
⁴ Fortune (August 17, 1998)
⁵ Mutual Funds (September, 2001)

Copyright © 2005 Integrity Marketing Solutions. All rights reserved. Some artwork provided under license agreement. This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.