Objective information about financial planning, investments, and retirement plans

Meaningful Family Conversations for the Holidays

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This post was written by fellow NAPFA-Registered fee-only financial advisor Megan Rindskopf.

With Christmas less than a week away and the streets abuzz with holiday spirit, it is easy to get consumed by the busyness of the holidays. We encourage you this season, amidst the shopping shuffle and the corporate holiday parties, to pause. Take time this year to reflect on the people and the relationships that are most important to you.

Every family is different and there is no one-size-fits-all solution to a family’s situation – whether family members are estranged or everyone is “thick as thieves,” take the opportunity this year to have meaningful conversations with your loved ones. Reflect on memories – appreciate the tough moments that have made your relationships stronger and be grateful for the memories that make you laugh. Most importantly though, share your thoughts and feelings with the ones you love, because we never know how short life might be.

As you enjoy the company of family and friends during the holidays, pause for a moment to consider the following: 

If something happens to me, will my loved ones be taken care of?

While this thought may seem a bit morbid around the holidays, in reality, what better time than when we are surrounded by family and friends to remind us to have the appropriate insurance coverage in place to protect the ones we care about most.

If you or your spouse become disabled, do you have the right coverage(s) in place to make sure you can still support your family? Retirement, college and other savings goals become much more difficult to accomplish when your income stream is greatly reduced or eliminated entirely.  Proper disability insurance can help supplement the loss of income associated with a long term disability. My colleague Cheryl Sherrard was recently quoted in Financial Planning Magazine regarding group disability insurance. Click here to read the article (free registration may be required).

If you or your spouse become ill and needs skilled nursing care, do you have Long Term Care insurance or adequate additional resources in place to cover in-home care or a skilled nursing facility?  Equally as important – have you had those conversations with your family members so they know what type of care you desire in the event a long term care need arises? It is important to have these discussions before an issue arises.

If you or your spouse passes away unexpectedly, do you have the right life insurance in place to support your family? Depending on your family and financial situation, you may or may not need life insurance coverage. It is important to understand both the amount and type of life insurance you need, in order to assess whether any adjustment is necessary. Work with a financial professional who knows you and thoroughly understands your needs and your goals when assessing your family’s needs.

Do I have current estate planning documents and have I communicated my wishes to my family?

It is imperative to have the essential legal documents in place to protect against the unexpected. In order to avoid family turmoil once you are no longer living, it is also helpful if you have discussed your wishes with the friends and family members involved. While these conversations can be difficult to initiate, they can bring clarity to a situation and help reduce family conflict once you are gone. If the conversations are too difficult to have, a hand-written letter or video can accompany the Last Will and Testament explaining your decisions.

If you are unsure if your documents are still adequate, consult your estate planning attorney to see if you need to establish new estate documents or update your existing documents.

The holidays present opportunities for family members to spend quality time together and create lasting memories. Show your gratitude this season by making sure your loved ones are properly protected financially and by having open, honest conversations with your family members before issues arise. Being proactive for the benefit of those you love is the best gift you can give this season.

Megan Rindskopf is a Financial Advisor for Clearview Wealth Management in Charlotte, NC. As a NAPFA-Registered Financial Advisor and CERTIFIED FINANCIAL PLANNER™ professional, Megan helps individuals and families reach their goals through a holistic and customized approach to financial planning. Much of her time is spent helping young, high earning professionals prioritize competing demands so that they may successfully achieve financial clarity and independence, along with a healthy work-life balance for the long term. Clearview Wealth Management is an independent, fee-only Registered Investment Advisor firm that cares deeply about each relationship and is committed to lifelong partnerships with clients and their successive generations. Megan can be reached at mrindskopf@cvwmgmt.com, or connect with her on LinkedIn. If you would like to learn more about Clearview Wealth Management and the people they work with, check out their website at www.clearviewwealthmgmt.com 

Thanks to Megan and her firm for these excellent thoughts and tips for addressing these difficult issues.

As always please feel free to contact me  at 847-506-9827 for a complimentary 30-minute consultation to discuss all of your investing and financial planning questions. Check out our Financial Planning and Investment Advice for Individuals page to learn more about our services.  

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Protecting Your Savings from the Cost of a Long-Term Care Illness

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Nursing Home

This is a guest post by Dagmar M. Pollex, J.D, an estate planning attorney based in Quincy, MA.  

The topic of protecting one’s savings from the cost of a long-term care situation is a key retirement planning issue for Baby Boomers approaching retirement and those already in retirement.  Additionally it is a major concern for those with aging parents as well.

Today, the risk of losing your life savings to a long term care illness looms as the largest threat to your future security. That’s why one of the biggest questions and concerns many people have about their lifetime financial security is what would happen if they suffer a long term disabling illness, such as Parkinson’s disease or Alzheimer’s.

The reason for this concern is clear. The cost of long term care varies according to where you live. Last year private room nursing home rates jumped 3.8 percent to a nationwide average of $90,520. In some parts of the country like Massachusetts and New York, the average cost is $120,000.00 to $150,000.00 a year – and increasing rapidly.

Long-Term Care Insurance

Medicare does not cover this cost so without long term care insurance, it wouldn’t take long for most families to lose all of their hard-earned life savings. If you are in your 60’s and in reasonably good health, it’s a wise idea to consult with a long term care insurance specialist. A long term care advisor can show you a variety of options tailored to your budget. But what if you can’t get long term care insurance because of a medical condition? What if your income and savings, especially after retirement, just won’t be enough to afford complete coverage?

First of all, don’t assume you need to purchase lifetime coverage. Even three to five years of coverage has provided important value to many of my clients.  To fill in the gap if insurance is not enough or if it’s just not obtainable, there is an increasingly popular asset planning technique for middle-class families today. With people living much longer these days comes the growing concern that some of the later years will eat up a lifetime of savings.

If you can’t get long term care insurance or can’t afford it or even if you have just a few years of coverage, this type of planning can protect assets from the worst case scenario of needing long term nursing home care for a substantial period of time.

Using a Trust

Planning ahead by using an irrevocable trust to preserve some of your assets helps you avoid the devastating loss of your life savings to a catastrophic illness. This type of trust which I call a Long Term Care Asset Protection Trust is also sometimes called a Medicaid Trust or an Income Only Irrevocable Trust.

The use of this kind of planning has increased in the last few years, especially since changes federal Medicaid law enacted in 2006 eliminated last minute planning opportunities. As a result, people who want preserve assets now need to plan before the need for care arises.

Many people have heard about this kind of planning but want to know more about how it works, when it should be used and the practical differences between an irrevocable asset protection trust and a revocable trust.

The Long Term Care Asset Protection Trust is a legal planning tool that is designed to protect some or all of your assets in case there is a need for an extended period of long term care in the future.

As the name implies, these trusts are irrevocable and require you to give up a certain degree of control over the assets transferred to the trust.  In exchange for protecting your assets from the astronomical cost of nursing home care, Long Term Care Asset Protection Trusts have some conditions attached to the use of the assets in the trust.

Under the terms of these trusts, the transferor (“grantor”) can receive all of the income produced by the assets in the trust for the grantor’s lifetime.  So by using a Long Term Care Asset Protection Trust, you can still reserve some control and retain some interest in the transferred assets – advantages that are not available when transfers are made outright to individuals.

You receive the income from the trust assets, but not the principal.  If you transfer your home to the trust, you can continue to live there.

Because Long Term Care Asset Protection Trusts are irrevocable, the grantor cannot revoke the trust and reacquire the assets; therefore, the assets are protected for long term care Medicaid eligibility purposes.

Long Term Care Asset Protection Trusts can be written to provide income tax advantages, and to allow the grantor some flexibility to change his or her beneficiaries. The trusts can also be drafted to allow the trust assets to obtain a “step-up” in value so your beneficiaries will not have to pay additional capital gains tax.

Dagmar’s is an estate planning attorney based in Quincy, MA.  Follow her on Twitter. 

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