protecting your income - her retirement · estate planning basics an overview of the estate...
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Protecting Your IncomeLong Term Care, Insurance
& Estate Planning
Is Long-Term Care In Your Future?
The number of people using nursing
facilities, alternative residential care places,
or home care services is projected to
increase from 15 million in 2000 to 27 million
in 2050.
Source: National Center for Health Statistics 2013
Long-Term Care
4http://longtermcare.gov/the-basics/how-much-care-will-you-need/
** U.S. Department of Health and Human Services, 2018. Cost projection is a hypothetical example of mathematical principles and is used for illustrative purposes only. Actual results will vary.
• Average 65-year-old has 70 percent
chance of needing long-term care.*
• Women on average need long-term care
for 3.7 years vs. 2.2 years for men (mix of
in-home care and in-facility).*
Current average cost of a one-year stay in a nursing home (semi-private room): $82,128**
According to the Genworth 2018 Cost of Care study, the
average national costs for care per month:5
4
Adult Day Healthcare
$1,560
In-Home Health Aide
$4,000
Nursing Home Private Room
$8,365*
Nursing Home Semi-Private
Room $7,441
5https://www.genworth.com/aging-and-you/finances/cost-of-care.html
How Much Does Long-Term Care Cost?
*Cost in 20 years at just a 3% inflation rate: $149,535**
Health Care
Source: Employee Benefit Research Institute, 2018
Sixty-five-year-olds who retired in 2018 might need these amounts to cover their health expenses in retirement
Woman
Married couple
Man $148,000
$161,000
$296,000
What Is Long-Term Care?
Ongoing services and support for people who are unable to care for
themselves due to:
Accident
Disability
Prolonged Illness
Aging
Where Can You Receive Care?
Home
Assisted-Living Facility
Adult Day-Care Center
Nursing Home
If You Need Help Someday, What’s Your Greatest Concern?
Ensuring you won’t have to rely on your family?
Staying in your home as long as possible?
Preserving assets for loved ones?
Protecting income for your healthy spouse?
How Will You Pay for Long-Term Care?
Pay out-of-pocket
Rely on government
programs such as
Medicare or Medicaid
Purchase Long-Term
Care insurance
Utilize Home Equity
Reserves
Paying for Long-Term Care - Medicaid
Medicaid is a program of last resort for people with limited assets
You may have to spend down your assets to qualify
Married couple $117,240
Single person $2,000
Medicaid limits where you can receive care
The state may seek reimbursement from your estate for benefits paid to
you
Source: National Clearinghouse for Long-Term
Care Information, March 4, 2013
Long-Term Care InsuranceHow Does It Work?
Reasonably good health
Premium is based on your age, health and the features and benefits you
choose
Pays benefits when a licensed health care professional certifies that you are
cognitively impaired or need help with 2 out of 6 activities of daily living
Eating
Bathing
Dressing
Toileting & Personal Hygiene
Transferring (getting in/out of bed or a chair without assistance)
Maintaining Continence (being able to control bladder or bowl function)
Long-Term Care InsuranceHow Does It Work?
3 Types of Coverage
Traditional “stand alone” LTC policy
Purchase a maximum daily benefit (i.e. $150 per day benefit x 365 days =
$54,750)
Min $125/day benefit protects a home in MA
Determine a contract term (i.e. 3yr, 5 yr or lifetime benefit)
Purchasing a maximum benefit amount (i.e. $54,750 x 5 yr benefit = $273,750 pool of
money)
Can extend the term beyond 5 years (i.e. $100/day utilized can provide 7.5 yrs of
benefit)
COLA Increases – Can purchase 1%,2% or 3% inflation rider to increase benefit
annually
Payments are made annually, semi-annually, quarterly or monthly
Long-Term Care InsuranceHow Does It Work?
3 Types of Coverage
Hybrid - Life Insurance with LTC Rider
Purchase a cash value life insurance policy with a LTC benefit Rider
Annual premium payments
Must qualify medically
The Death benefit can be utilized if a LTC need
Must satisfy 2/6 ADL’s and qualify for LTC benefits
Long-Term Care InsuranceHow Does It Work?
3 Types of Coverage
Hybrid – Asset-Based LTC
Purchase an annuity with an LTC benefit
Lump-sum purchase payment
Receive 2-3 times multiple of the annuity premium payment for LTC
purposes
Must satisfy 2/6 ADL’s to qualify for LTC benefits
Typically receive a 1-3% compounded return on annuity value
Typically receive a Death benefit of 125% - 200%
Must qualify medically
The Cost of Waiting
No one knows when the need for long-term care
services will arise. It may be smart to buy a policy when
you’re young and in good health (typically around age
60)
The cost is based on your age, so it may never be more
affordable
A change in your health may leave you unable to purchase a
policy at any price
Elder Care Law Attorney
Coordinating an LTC Policy with a well thought out plan can
be the most effective method to protect your retirement
outcome and ultimately your estate
Revocable Living Trust – Assets placed in the trust will bypass
probate cost and delay associated with probate
Does not protect assets from LTC cost and Medicaid spend-down
In Massachusetts you are allowed to keep $2,000 when applying for Medicaid .
Over this amount must spend-down on care.
Community Spouse is allowed to keep 50% of their assets up to $123,600. in
countable assets.
Family Assets, Massachusetts Medicaid Nursing Home Eligibility Information & Rules For 2018 (updated January 21, 2018)
Consult a qualified Elder Care Law attorney for complete legal advice as this is not complete and comprehensive advice and only meant for informational purposes
Long-Term Care Planning Checklist
Explore services and costs in your area
Assess your finances
Talk to your family about your plans
Compare options with the help of a qualified financial professional
Prepare health-care directives and discuss with a qualified Attorney
Estate Planning BasicsAn Overview of the Estate Planning Process
What Is an Estate Plan?
An estate plan is a map
This map reflects the way you
want your personal and
financial affairs to be handled
in case of incapacity
or death
Who Needs an Estate Plan?
Chances are, you do
Not just for the wealthy
Without an estate plan, you
can’t control what happens to
your property if you die or
become incapacitated
An estate plan makes your
wishes clear and helps avoid
family disputes
Proper estate planning can
preserve assets and provide
for loved ones
Especially needed if:
Your spouse isn’t comfortable
with financial matters
You have minor children
Your net worth exceeds the
federal transfer tax exclusion
amount ($11,400,000 in 2019)
or, if less, your state’s
exemption amount
You own property in more than
one state
Financial privacy is a concern
You own a business
Basic Estate Planning Concepts
Planning for Incapacity
Health CareProperty
Management
Planning for Death
Wills and Probate
Tax Basics
Lifetime Gifting
Life Insurance Trusts
Planning for Incapacity —Health-Care Directives
Do Not Resuscitate(DNR) Order
Durable Power ofAttorney for Health Care
(Health-Care Proxy)Living Will
Not all types of health-care directives are effective in all states, so be sure to execute the one(s) that will be effective for you.
Puts your instructions
in writing
Lets you designate an agent to makedecisions on your
behalf
Directs thatresuscitative measures be withheld orwithdrawn
Living TrustDurable Power ofAttorney (DPOA)
Joint Ownership
Joint owner hasthe same accessto property as
you do
Lets you designate an agent to makedecisions on your
behalf
Lets a successortrustee take overmanagement oftrust property
Planning for Incapacity —Property Management Tools
What Happens If You Die
Without an Estate Plan?
Some property passes automatically to a joint owner or to a designated beneficiary (e.g., IRAs, retirement plans, life insurance, trusts)
All other property generally passes according to state intestacy laws
What Happens If You Die Without an
Estate Plan? — Intestacy
Intestacy laws vary from state to state
Typical pattern of distribution divides property between surviving spouse and children
Your actual wishes are irrelevant
Many potential problems
A typical intestate distribution pattern looks like this:
Child
¼Child
¼Wife
½
Husband / Father
Wills & Probate
A will is the cornerstone of an estate plan
Directs how your property will be distributed
Names executor and guardian for minor children
Can accomplish other estate planning goals (e.g., minimizing taxes)
Written, signed by you, and witnessed
Wills & Probate — Avoiding Probate
Can you avoid probate?
Yes, an estate plan can be designed to control which
assets pass through probate, or to avoid probate.
Own property jointly with rights of survivorship
Complete beneficiary designation forms for property
such as IRAs, retirement plans, and life insurance
Use trusts
Make lifetime gifts
Tax Basics
Transfer taxes include:
Federal gift tax — imposed on transfers you make during your life
Federal estate tax — imposed on transfers made upon your death
Federal generation-skipping transfer (GST) tax — imposed on transfers to individuals who are more than one generation below you (e.g., grandchildren) both during your life and upon your death
Transfer taxes imposed on the state level tend to affect smaller estates.
Transfer Tax Basics
2017 2018 2019
Top rate 40% 40% 40%
Gift and estatetax exclusion
amount
$5,490,000 $11,200,000 $11,400,000
GST tax exemption
$5,490,000 $11,200,000 $11,400,000
Lifetime Gifting
Lets you see the recipient enjoying your gift
Lets you minimize transfer taxes by taking advantage of the $15,000 annual gift tax exclusion and other tax deductions
Removes future appreciation of property from your taxable estate
No “step-up” in basis —your basis in the property carries over instead
Trusts
Versatile estate planning tool
Can protect against incapacity, avoid probate,
minimize taxes
Allow professional management of assets
Provide safeguards for minor
children, elderly parents,
other beneficiaries
Can protect assets
from future creditors
Control over property
Trusts — What Is a Trust?
Legal entity that holds
property
Parties to a trust:
grantor, trustee,
beneficiary
Living trusts vs.
testamentary trusts
Revocable trusts vs.
irrevocable trusts
Grantor
Trust Agreement
BeneficiariesHave rights to trust propertyunder terms of trust agreement
Trust Property
TrusteeManages trust property according to trust agreement
Life Insurance
Can provide instant estate
Can provide needed estate liquidity
Life insurance proceeds are included in your estate for federal estate tax purposes unless your estate plan addresses this issue
Key issue is ownership of policy
Conclusion
Have you implemented a plan for
incapacity (health and property)?
Do you have a valid will?
Are transfer taxes a planning
concern for you?
Does your overall estate plan
reflect your current wishes
and circumstances?
Planning for Higher Health Care Costs in
Retirement
35
What Can Cause Your Health Care Budget to Change
in the Future?
Health care costs will likely increase due to:– Higher insurance premiums (inflation)
– Higher utilization with declining health
A change in health status may require:– Expensive prescription drugs (donut hole)
– More services not covered by insurance
Dental
Vision
Hearing
Alternative care
Long-term care
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Planning for Future Health Care Costs
According to this source . . . You will need to have this much at the start of retirement to pay for futuremedical expenses, not including long-term care
Fidelity $260,000 for couples
Employee Benefit Research Institute $124,000 for men
$140,000 for women
$259,000 for couples
Your own customized analysis ???
37
What Is Medicare?
National health insurance program for people 65+
Administered by the Centers for Medicare and Medicaid Services (CMS), an agency within the Dept. of Health and Human Services
Enrollment through the Social Security Administration (SSA)
Don’t confuse Medicare and SS eligibility
38
Who Is Eligible for Medicare?
Everyone over 65
All U.S. citizens
Legal residents who have lived in the U.S. continuously for at least 5 years
People under 65 who have been receiving Social Security disability benefits for 24+ months
39
Enrolling in Medicare?
If you are not receiving Social Security when you
turn 65:
–Must sign up through Social Security Administration
during a Medicare enrollment period
• Initial enrollment period: If you are not covered by
a group plan at 65
• Special enrollment period: If you are covered by a
group plan at 65
• General enrollment period: If you missed your
initial or special enrollment period40
Enrolling in Medicare?
If you are receiving Social Security when you turn
65:
Medicare Parts A and B are automatic
(can decline if don’t want Part B)
Coverage starts 1st of month turn 65
Parts C, D and “medigap” plans are not automatic;
must choose private insurer and proactively enroll
41
Best Time To Enroll in Medicare
To avoid late-enrollment penalties: Sign up during initial or special enrollment period
To avoid gaps in coverage:Sign up before current coverage ends
For Help with Medicare Decisions:
Call Medicare Back Office at 1-877-385-8083
Give them Brian’s name: Brian Saranovitz
42
What if You Don’t Enroll in Medicare on Time?
• You may pay late-enrollment penalties.
• Your health care expenses may not be covered by
insurance.
• Your private insurance options may be limited.
43
Three Reminders
44
1. Enroll in Medicare on time.
2. Shop carefully for private insurance to go with
Medicare.
3. Plan for higher health care costs in retirement.
4. For Help with Medicare Decisions:
Call Medicare Back Office at 1-877-385-8083
Give them Brian’s name: Brian Saranovitz