Over the past six or so months, my family had the opportunity and the honor to serve my father who eventually was diagnosed with a form of dementia, which was caused by small strokes. To say that we were NOT ready and able is an understatement. The willingness was there, but not necessarily the ability to deal with this horrific, debilitating and often strange disease. Recently, my father passed into eternal life which also begs the question, were we ready for life after dad and grandpa?
Spiritually and emotionally, probably not. But what about financially? What were going to be the repercussions of both his disease and his death?
Without getting too personal, let’s just say that the disease progressed rather rapidly after his first fall at home. It got to the point that someone had to be with him 24/7 because his sleep-wake patterns were all discombobulated and his balance was such that the danger of falling was getting worse each and every day. As his caretakers, the lack of sleep was taking its toll. The decision was made to bring in a home care agency to be with him at night. The cost for this service was $22 per hour for five hours per night and eventually had to be setup for seven days a week; approximate cost – $3,100 a month.
As time went by, we felt we could not satisfactorily and safely care for my father. The decisions was made to move him into an Alzheimer’s/Dementia care facility. Approximate cost – $5,600 per month.
During the decision-making process, a part of the discussion revolved around finances. How long would his money last? Would there be anything left for the legacy he adamantly wanted to leave his granddaughters? Well, the answer to that is all about life expectancy. However, one factor that could have made a difference was a Long Term Care Insurance Policy. Not only would that have extended his ability to pay, but also may have been able to protect some of his liquid assets.
Obviously by the time of diagnosis and declining health, Long Term Care Insurance (LTCI) was not an option. No insurance company is going to take the risk at that point. But, proper planning during his 50’s and early 60’s would have made a lot of sense.
There are three options when considering LTCI: Traditional LTCI policies, Life/LTCI hybrid policies and Asset based policies. The traditional policy can offer a monthly benefit (i.e. $3000-6000) for a fixed period (3-5 years) to cover in home healthcare, assisted living and nursing home expenses. The advantage to this type of policy is that you get most coverage for your money, it can be state partnership qualified, which potentially protects assets from Medicaid and often has a rising benefit of 3-5% per year to keep up with inflation. The downside is that if you never need the coverage, the money paid in annual premiums is gone and does not go to beneficiaries. The other two options are hybrid options combining life insurance or annuity contracts with a LTCI rider. The advantage to these options are that if the benefits are partially used or not needed at all, the beneficiaries inherit the remaining assets. The disadvantages are that the overall cost could be higher than a standalone LTCI policy and they are not going to plan for this risk when they are healthy and speak to a financial professional about which options best fir their goals and needs.
Part of my job responsibilities at Day Air includes presenting on the topic of Financial Literacy. During many of these presentations, I emphasize the importance of have a financial team in place to help you through your financial life. One of those team members should be an attorney. Why? One reason is estate planning.
I must say my father was quite prepared in this area. He had an experienced attorney on his team. He had a will and she also advised him to set up beneficiaries on all his bank and investment accounts as well as his real estate. But, what happens if you die without a will? I ask this question during my presentations and invariably I get the answer; “my money goes to the State.”
Actually, each state has a specific process for disbursing assets that are considered interstate (without a will). This process allows time for creditors of the deceased to make claims against the estate and for the court to determine the closest living relatives. It is important to realize that each state has its own specific process and that the wishes of the deceased may not be carried out. Issues often arise when there have been multiple marriages, children from multiple marriages, step children, and real property in more than one state. The negative consequences of failure to plan ahead can cause the estate to be probated in multiple states causing additional time, high additional costs in court and attorney fees, delay in beneficiary inheritances, family squabbles, etc. This can be avoided by taking the time to plan properly.
In conclusion, have an open dialogue within your family about possible long-term care decisions and estate planning. If you need help, Day Air is there for you, our Financial Planning Center available through CUSO Financial Services, LP, can help you with these discussions. After all, our mission is to enhance the financial well-being of our members.
*Non-deposit investment products and services are offered through CUSO Financial Services, LP. (*CFS*), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.