Three important legal documents that every adult should have are a will, a living trust, and a living will. Each document defines your decisions for the different areas of your estate and will save your loved ones time, money and stress when you are gone. These documents are easy to draw up, or you could have a lawyer prepare the documents for a nominal fee.
A WILL dictates how your estate and property is to be distributed after your death and can also designate guardians for children and self should you become incapable or pass away. A regular will must pass through probate court in most states before your estate can be passed on to your heirs. Most state laws do not require that you use a lawyer to prepare your will; you can use a will kit at home. Probate court can take some time if there are any disputes, so make sure your wishes are clear when writing your will. A LIVING WILL defines your wish to be kept or not kept alive by artificial life support in the event of terminal illness or injury. A living will also give you the ability to set limits on your hospital, medical and funeral costs that can easily drain your estate and leave your loved ones with the bills. If you express your wishes beforehand, it will make the process much less stressful for those involved in your care and the execution of your final wishes. A LIVING TRUST is quite similar to a regular will, but they are different at the core. Unlike a regular will that cannot be changed after it is written, a living trust can be amended at any time. A living trust takes effect while you are alive, whereas a will takes effect after you pass. You can put property into your living trust at any time before your death and afterward your estate goes directly to your heirs without passing through probate court. If you ever change your mind about the definitions of your will, you can change or revoke how your estate will be divided at any time by using a living trust. A living trust will also save money and time later on because your loved ones won’t have to go through probate first.Posts
With everything going on in December, taxes are the last thing we want to think about. But this is a crucial time if you’re looking to save some money when you send in returns in a few months. You probably already know to make sure you’ve used up your flexible spending account or to contribute to your IRA, but here are a few other things you can do during the year-end crunch.
- Decide whether or not you (or your parents) will itemize deductions. Run the numbers to decide whether you’re better off taking the standard deduction (which is $5,950 for single filers or $11,900 for those who are married filing jointly). If you are going to itemize, look for opportunities to increase the amount of deductions before the year is over, since all deductions will lower your tax bill. For example, if you make a larger-than-usual donation to charity you’ll reap extra benefits. This may motivate you to do a little holiday cleaning, and take unused clothing or furniture to The Salvation Army or Goodwill. These organizations will provide you with a receipt, and you’ll be able to claim the item’s fair value as a deduction.
- Make large gifts now. If you or your parents want to give someone a large cash gift, write the check and make sure it’s cashed before January 1. You can give as much as $13,000 to an individual without being required to pay gift tax.
- Make an extra house payment. Here’s a trick for maximizing your deductions if you’ll be itemizing next year. Make your January mortgage payment early. As long as you mail it by December 31, the payment will qualify for this tax year.
- Review medical expenses. How much have you and your parents paid for medical care out-of-pocket? If your medical expenses are greater than 7.5 percent of your adjusted gross income, you can deduct them on your tax return. If you are close, you may be able to find ways to get care or purchase supplies that will put you over the edge.
- Consider claiming your parent as a dependent. If you pay more than 50% of your parent’s expenses, and their gross income is less than $3,800 (not counting disability payments, tax-exempt income, or Social Security), you can claim them as a dependent. Again, if you’re just shy of qualifying, see if you can make up the gaps in the last few weeks of the year.
When thinking about how to pay for assisted living, one option that seniors and their caregivers forget about is the ability to turn any active life insurance policy into a long-term care benefit plan. This little-known option has actually been in existence for decades, but few people take advantage of it.
Once a person reaches old age, life insurance is nice to have but not crucial, as more often than not they don’t have any dependents. However, long-term care is a major expense at this point in time. This option gives seniors the flexibility to use this investment for needs that are more pressing. The benefit can be used with any type of life insurance policy: term, whole, or universal.
In some ways, this benefit is similar to regular long-term care insurance (though the two are not exactly the same). Once the life insurance policy is converted, ownership of the policy shifts from the policyholder to a benefits administrator entity. The benefits administrator takes over responsibility for paying the monthly premiums on the policy. An account is set up from which the benefits administrator pays a specific amount, based on the value of the policy, towards the original policyholder’s long-term care needs. Often the monthly payment is flexible – for example, if the value of your policy is $24,000, you might be able to choose to receive $2,000 per month for 12 months, or $1,000 per month for 24 months.
It may not be a large enough amount to pay the full assisted living bill, but it can yield a significant monthly sum that will go a long way towards defraying costs. In many cases, the long-term care benefit is worth much more than the cash the policyholder would get by simply surrendering the policy.
Taking this option doesn’t mean completely forgoing the benefits of life insurance. You are often able to keep a small funeral benefit worth around one or two thousand dollars.
There are several reasons why this route may NOT work for you. For example, if you have a small policy of $10,000 or less, you’ll likely find that it’s better to choose the cash surrender value or simply keep the life insurance. Also, in some cases the cash surrender value may be larger than the long-term care benefit. Finally, in order to use this option you must have an immediate need for some form of approved long-term care. Payments are made directly to the long-term care provider, not to you.
If this seems like a possible option for you or your loved one, speak with a financial advisor who specializes in helping seniors.
Are you searching for a memory care facility for your loved one, but aren’t sure where to start? Our new complimentary ebook, How to Choose a Memory Care Facility for Your Loved One, is a thorough resource that tells you everything you need to consider when making this important decision. Alzheimer’s disease and dementia are challenging conditions, both for patients and for their families. There comes a point when the care mom or dad needs goes beyond what adult children can provide on their own. It’s at this stage that families begin to seek out a place where their loved one can not only have their care needs met, but hopefully thrive as well.
This guide covers the following:
- What to look for regarding a facility’s environment, safety, staffing, quality of care, and policies.
- A checklist of important details that can help you distinguish high-quality care homes from the rest.
- How to identify signs that a facility has serious underlying problems.
- Types of facilities that have dedicated staff and highly personalized care.
- Important considerations when evaluating the cost of memory care.
Photo used under Creative Commons from bradipo.
Photo used under Creative Commons from imarcc.
- Does the facility cover these plans with the residents and the staff on a frequent schedule? There should be regular reviews and drills that involve both the residents and the staff. What kind of emergency training do staff members have?
- Is someone who is well-versed in the plan and capable of leading staff in carrying it out on site at all times? Is there a plan to increase staff during a disaster? The number of people necessary to support a facility on a day to day basis may be insufficient during an emergency situation.
- Are there disaster kits on site? If so, what is included in these kits and how will they be distributed and used in the event of a disaster? A facility should have disaster kits on hand that provide each person with canned food and water for one week. The kit should also contain candles, matches, flashlights, batteries, and first aid and sanitation supplies.
- Even during an emergency, residents need to continue following their care plans. Ask the facility about their ability to continue without interruption during a disaster. Care plans should be easily accessible.
- How will essential medications be dispensed during and after a disaster? You will want to be sure your loved one can get their medication during disasters.
- Is there a plan for how to notify family members in an emergency?
- How often is the plan updated?
Photo used under Creative Commons from Casey Serin.
The desire to stay in your own home and remain independent as long as possible is a strong one. Unfortunately, as we get older we eventually reach a point where this is no longer viable or safe. How can you convince a parent that it’s time to make a move to assisted living, where they can get the support they need, and help them see the transition as a positive one? Here are several tips for having this difficult conversation.
Enlist the help of a medical professional. If your parent is like most of us, he or she will have a sense of pride regarding the ability to care for him or herself. This is completely natural, and the idea that one can no longer do this is a severe blow. It is for this reason that seeking the opinion of their doctor or another healthcare provider they trust can help to add weight to your suggestions when discussing the potential move to an assisted living facility.
Avoid potentially condescending sympathy. It is important to realize that, despite any health complications that your parent may be experiencing, your sympathy is not what’s needed at this moment. Of course, it is always nice to have compassion for your parent. Yet discussing the move to an assisted living facility can elicit feelings of powerlessness, and providing heaping doses of sympathy could make matters worse.
Approach your parent with respect. Treat your parent as an independent person capable of making decisions and deserving of the same respect and considerations as anyone else. There are some situations where maintaining this tone could prove challenging. Diseases such as dementia can greatly impair your parent’s ability to process and understand what is happening, and may force you to take on a more guardian-like role in such cases. The underlying idea that you can still treat your parent with respect and value his or her preferences still applies more than ever.
Emphasize safety. The number one priority and guiding factor in all discussions and arrangements surrounding a parent’s move to an assisted living facility should be their health and well-being. The more that you can bring this point into focus, the better the transition process will likely be. If, for example, your parent has fallen several times while unsupervised, resulting in hospital stays and broken bones, reminding them of this in a gentle and understanding manner may help them see the logic in making this transition.
Above all, listen. Listening may be all you need to do to help your parent accept the idea of assisted living. It’s very possible that he or she will want to make the move, yet also feels a need to express all of his or her resentments and worries about doing so. By listening, you will help your parent feel more understood and will also help make him or her more receptive to your own feedback.
There is no simple and easy way to discuss assisted living care with a parent. The process can, however, be an opportunity for you two to grow closer as you share your thoughts and feelings about the matter in an open and non-judgmental atmosphere.You may have recently heard about the option of life settlements, where you sell your life insurance policy to a third party, and be considering this option in order to fund assisted living. The buyer of the policy takes responsibility for the premiums, and then receives the benefit when you pass away.
These offers are certainly tempting, but make sure you’re considering all the possibilities open to you first. For example, you may be able to take out a loan on the cash value of the policy. You may also be able to reduce the death benefit in exchange for lowered premiums, which will allow you to hold on to the policy and some of its value. Finally, if you are terminally or chronically ill, you may be able to receive an accelerated death benefit while you’re still alive. Don’t make the decision to give up your life insurance lightly: if your policy has value to investors, it also has value to your heirs. Remember why you bought the policy in the first place.
On the other hand, if it’s likely you will lapse on your policy anyway, a life settlement can make a lot of sense. If you have decided that a life settlement is the best choice for your situation, make sure you do your research. Different life settlement providers may make you different offers, so be sure to shop around. You may want to consider using a life settlement broker, who will act in your best interest. Also know that you do not need to sell your whole policy: you may be able to arrange to keep a portion of the benefits.
How much you can get for our policy will depend on your life expectancy, how much needs to be paid in premiums to keep the policy in force, and the policy’s cash value. Think through the various implications of receiving such a large sum of money. Some of the settlement may be taxable, and any creditors you have may be able to claim the money. Also consider whether your social security or any other public benefits you receive will be affected.
Beware of schemes where you buy life insurance with an agreement to sell it later. This is called Stranger-Originated Life Insurance (or STOLI) and it’s illegal in most states. Insurers may refuse to pay benefits on these arrangements.
To learn more and to find out how life settlements apply to your specific situation, consult with your insurance agent, a financial advisor, or lawyer.
The biggest fear many have when making senior living decisions is what it will cost. The fees for assisted living facilities at first glance may seem quite high. Keep in mind though all that assisted living covers: housing, at least some meals, and help with your daily needs. Beyond assisted living and your medical expenses, you will likely need to spend very little, if anything. Assisted living is usually paid for using long-term care insurance, personal funding, or veterans benefits. These funds may be supplemented by social security.
Long-Term Care Insurance
Long-term care insurance covers services that help people who need medical or non-medical care over a long period of time. It will cover assisted living if you cannot perform two or more “activities of daily living” (ADL), such as walking, using the bathroom, or getting dressed. You may have to have an examination by a doctor chosen by the insurance company to be sure that you qualify.
The benefit is often structured so that the policy has a daily limit, usually $100-$150, and a lifetime maximum, for example $250,000. Some policies have an elimination period, an amount of time during which you must pay for your own care (similar to a deductible).
As you grow older, your premium is likely to rise since the older you get the more likely you are to require long-term care. If the premium rises beyond your ability to pay, the insurance company will likely offer a lower premium in exchange for reduced benefits. In some but not all plans, you no longer have to pay your premium once you begin using the benefit.
Personal Funding
Money to pay for assisted living may come from retirement funds like Individual Retirement Accounts (IRAs), pensions, or 401k plans.
People also use the funds from the sale of their home. A home purchased 40 or 50 years ago will yield quite a bit of equity that can go towards senior care. If you are unable to find a buyer by the time you need to move, you may be able to get a bridge loan to help pay for your care. This loan provides immediate funding, which you then pay back when your house does sell. You can usually gain at least a few extra months to sell your home before you need to start making payments on the loan.
If you don’t want to sell your home, there are other options available. You may be able to rent it out, thus giving you a monthly income. You may also be able to take out a reverse mortgage, where you receive money drawn against the equity you have in your home. You can receive this money as a lump sum, monthly payment, or revolving line of credit. Keep in mind that your spouse (or someone who owns the home with you) must still be living in your home for you to qualify. Also, the starting costs associated with these loans can make them quite expensive.
With any of these financing options, if you have relatives who are in a position to lend you money in exchange for equity in your home, you may be able to come up with a similar arrangement privately, rather than borrow from a bank or other company. Consult with a lawyer to learn more about this option.
Veterans Benefits
Veterans benefits may be able to help you finance care in an assisted living facility, if you or your spouse served in the military. This is the Aid and Attendance tier of the Improved Pension offered by the Veteran’s Administration. You do not need to have any sort of injury related to your service, though you must have been on active duty at least 90 days and one day during wartime. You also must have less than $80,000 in assets. You’ll need to file the Veteran’s Application for Compensation and/or Pension (VA Form 21-526, Parts A, B, C, and D).
A Note on Medicare and Medicaid
First, you should know that some assisted living facilities, including Raya’s Paradise, only accept long-term care insurance or private funding. Also be aware that Medicare does not pay for assisted living as assisted living is not medical care but rather assistance with your daily needs (Medicare will pay for medical expenses incurred during the time you are in the assisted living facility, such as your prescriptions or visits to the doctor). Medicaid might pay for a limited stay (often 90 days or fewer), but even then, coverage is limited. In some states Medicaid pays for the personal care services you receive, and in others it pays for room and board as well. Medicaid does not currently pay for assisted living in the following states: Pennsylvania, South Carolina, Alabama, Kentucky, and Louisiana, though it is likely that there will be national coverage in the coming years.
Finally, you may be eligible for tax deductions that can also help pay for senior living expenses by reducing your tax liability. You can learn more by doing research at www.irs.gov on the Elderly and Disabled Tax Credit and Medical Expense Tax Deductions, and on your state’s elderly care tax credits. You may also find it helpful to talk to an accountant.