Wednesday, September 26, 2018

Long Term Care Insurance Choices - Riders and Hybrids

“Planning ahead for long-term care is important because there is a good chance you will need some long-term care services if you live beyond the age of 65,” cautions As Indiana elder attorneys, we certainly agree that long-term care planning has an important place in both retirement and estate planning, helping clients take charge of their finances and protecting both themselves and their heirs.

In particular, at Rebecca W. Geyer & Associates, our attorneys have been paying attention to the reduced number of viable long-term care insurance choices being offered to our Indiana estate planning clients. Why?  “For aging baby boomers, planning for long-term-care costs becomes more pressing every day. But the insurance that helps cover those costs is surging in price, while the benefits are becoming skimpier.”

There are two phenomena to which we’ve been paying special attention:

1.  Living benefit riders on life insurance policies
Living benefit riders take money out of the death benefit to pay for insureds’ medical care needs while they are still alive. The payment of the death benefit is “accelerated” and paid out while the insured is still alive, typically under any of the following three circumstances:
  1. The insured has been diagnosed with a terminal illness with a 6-24 month life expectancy.
  2. The insured has a chronic illness that leaves him or him unable to perform activities of daily living (bathing, continence, dressing, eating, toileting, transferring).
  3. The insured has a critical illness (heart attack, stroke, cancer, renal failure, organ transplant, ALS, blindness, paralysis)
At first, explains, living benefit riders were offered only on cash value policies such as whole life or universal life, but they are now available in term life insurance products as well.

2.  Hybrid insurance
The hybrid insurance policy allows death benefits on life insurance to be used towards long-term care costs. These policies overcome the difficulty many clients have in paying for long-term care insurance, which they may be lucky enough to never need to use, but whose premiums are non-recoverable. With a hybrid policy, Damon Gonzales of points out:
  1. After a surrender charge period (usually 10 yrs.), you can cancel and get a refund
  2. There is a death benefit paid to heirs when you die
  3. There is a guaranteed cash value, a guaranteed death benefit, and a guaranteed amount of long- term care coverage
Along with these advantages, Nerdwallet points out three big drawbacks hybrids have:
  1. Premiums, paid over shorter periods of time than traditional long-term care premiums, can be much less affordable
  2. There is hardly any growth offered on the cash value
  3. Premiums are not tax deductible (Hybrids are not considered tax-qualified policies) 

At Rebecca W. Geyer & Associates, we offer no insurance projects or direct tax advice, working with other advisors to address insurance product choices. Long-term care insurance is just one more example of the overlap among professionals in the area of law, insurance, and tax.       
Realizing, however, just how crucially important this subject is for the long-term well-being of our clients and their family members, we at Geyer Law want to provide the most up-to-date information on the subject of long-term care.

- by Rebecca W. Geyer

Wednesday, September 19, 2018

In Buying Long Term Care Insurance, It Pays to Go for the Sweet Spot

“For aging baby boomers, planning for long-term-care costs becomes more pressing every day. But the insurance that helps cover those costs is surging in price, while the benefits are becoming skimpier,” Eleanor Laise comments in Kiplinger’s Retirement Report.

It’s true. According to the American Association for Long-Term Care Insurance, the overall cost of new long-term care coverage has been jumping roughly 9% a year.

At Rebecca W. Geyer & Associates, our attorneys have been paying attention to the reduced number of viable long-term care insurance choices being offered to our Indiana estate planning clients. For one thing, as Kiplinger mentions, benefits such as lifetime coverage and a 5% compound inflation benefit protection have either become unaffordable features or aren’t being offered by some insurers.

There are most definitely “sweet spots” for purchasing long-term care insurance, we concluded.  Those “sweet spots” relate to wealth, health, and age:

Age related sweet spot:

Ideally, clients purchase long-term care insurance when they are in their 50s. Not only do premiums begin to rise quickly from there, but one-quarter of applicants age 60-69 are rejected, Laise points out.

Asset-related sweet spot:
Wealthy people (Kiplinger refers to those with financial assets of $2.5 million +) may decide to forgo insurance. If they end up not incurring long term care costs, their heirs will receive more; if they do need to pay for long-term care, they can afford to do so. People with limited assets and those who cannot reasonably sustain the premium costs over decades would be better off not buying expensive policies, perhaps choosing lower benefits or limited benefit period coverage.

Health-related sweet spot:
Insurers have been tightening their underwriting standards, Laise emphasizes, so buying while you’re in good health has become even more important. Some companies have added blood tests and scrutinize family history for heart disease and dementia.

At Geyer Law, there are two phenomena we’re paying attention to - permanent life insurance with a critical care rider and hybrid insurance. In next week’s blog post, we’ll discuss the plusses and minuses of each of these approaches to long-term care insurance.  Stay tuned….
- by Rebecca W. Geyer

Wednesday, September 12, 2018

Avoid Aretha's Estate Planning Mistake

Avoid the estate planning mistakes of Aretha Franklin and Prince, advises Richard Eisenberg, writing in Both these one-time blockbuster music stars died without a will or trust, Eisenberg notes, and, he warns, “Following in their footsteps could mean your loved ones won’t receive the inheritances you intended.” Problems you might cause your heirs include:
  • Disbursements could be long-delayed
  • Ugly family squabbles might ensue
  • Your estate might owe additional taxes
  • Your financial life will become a public record
  • If you have a special needs child, he or she may wind up losing government benefits
Considering the fact that Aretha Franklin knew she had pancreatic cancer, you would think she’d have considered creating a will.  At least one of her attorneys tried to get her to do exactly that, but the singer never followed through, Eisenberg relates.

What’s so all-important about having a will?
Having a will means that you, rather than your state’s laws, decide who gets your property when you die, explains. Wills can:
  • distribute your property
  • name an executor
  • name guardians for children
  • forgive debts
Without a will or other estate plan, state laws known as "intestate succession laws" decide which family members will inherit your estate and in what proportion. Most people want to distribute their property differently than the state would distribute it, continues. For example, many people want to leave gifts to friends, neighbors, girlfriends, boyfriends, schools, or charitable organizations – and intestate succession does not allow for any of that.

At Rebecca W. Geyer & Associates, our attorneys are focused on understanding your particular goals and concerns, taking a lifetime planning approach. That means planning for each client’s’ current needs as well as for a potential disability and death.

Control is really the name of the game and the real reason for having a will. Few people have an estate worth $80 million (the estimated value of Franklin’s estate), but deciding how one’s assets are distributed is still most people’s preference. Keep in mind that settling an estate involves a lot of emotions. The slightest differences can result in hurt feelings and recriminations. A will that clearly lays out your wishes may reduce conflict and speculation over what you “would have” wanted.
- By Rebecca W. Geyer

Wednesday, September 5, 2018

The Executor Shouldn't Need to Start from Scratch

When there’s a death in the family, the responsibility of settling the estate is often designated to the oldest child or to a sibling. One problem that too often arises, explains certified home inventory professional Cindy Hartman, is that, in addition to making funeral arrangements, placing the house on the market, and finalizing the financials, the executor needs to create an inventory.

The inventory consists of a list that must be submitted to the court within sixty days of the estate’s opening.  The list needs to include all financial assets as well as the contents of the home (and of any storage facilities) containing the deceased’s belongings. And not only does that inventory list need to be compiled, the executor must determine the fair market value of each item. In other words, besides gathering the estate property, paying debts and distributing assets to the decedent's heirs, the executor must also complete a court-approved inventory form.

That means that, at one of the most emotion-filled times in his or her life, the question on an executor’s mind is typically “Where do I start?” Hiring a certified home inventory professional can relieve the executor of this work, Hartman explains.

As estate planning attorneys, we at Geyer Law counsel:
  • executors
  • personal representatives
  • trustees and
  • beneficiaries,
with the goal of reducing stress and ensuring prompt resolution of the settlement and administration of estates.  We’ve found that regular communication with all parties involved goes a long way to reduce conflict and delays.

Still, it’s always better when you start things out as part of your estate planning process, rather than leaving the job to your heirs.  To start, Investopedia suggests, go through the inside and outside of your home and make a list of all items worth $100 or more. “Examples include the home itself, television sets, jewelry, collectibles, vehicles, guns, computers/laptops, lawnmower, power tools and so on,” the authors of “16 Things to Do Before You Die” advise.

Cindy Hartman has it right: Often individuals do not know where to begin when someone in their family dies. Planning before death can relieve a large portion of the burden work that falls upon the executor, although there are still tasks that will remain to be accomplished. We provide full-service estate administration services to guide families through the process from start to finish.

 - by Ronnie of the Rebecca W. Geyer blog team