How To Reduce The Premium Cost for Long Term Care Insurance
September 29, 2013
Q. My wife and I are looking into purchasing long-term care insurance policies for the future, but we are concerned about the premium cost. Are there any ways to reduce the cost?
A. Yes. While long-term care insurance is a good way to plan for the future, the premiums are not inexpensive as you have discovered. However, there are some ways that you can tinker with the policy terms in order to reduce that cost:
1) Shorter Benefit Period: probably the most significant cost saving step is to purchase a policy which covers a limited term of years, rather than for the balance of your lifetimes. Unless you have a family history of a chronic illness, it is not likely that you will need coverage for more than 5 years. According to a study from the American Association of Long-Term Insurance, only 8% of people who needed coverage needed it for more than 5 years. By purchasing coverage for 3, 4 or 5 years, rather than for your lifetimes, you can save thousands of dollars in annual premiums. Alternatively, if you do have chronic illness in your family, perhaps you may wish to consider a policy with a longer fixed duration, e.g. 10 years.
2) Longer Waiting Period: most policies have a waiting period before coverage begins, which is typically between 30 and 90 days. The longer you make this waiting period, the cheaper your premiums. Remember, though, that you will have to pay the cost of care out of your own resources during this waiting period.
3) Reduce Daily Benefit: instead of purchasing the maximum daily benefit you might need in a nursing home, you might consider insuring for only a portion. A lower daily benefit will mean a lower premium. But you will then have to pay from your own resources for the uninsured portion.
4) Shared Care Policy: if you buy a policy to cover both you and your spouse, a shared care policy might give you more coverage for less money. With the shared care policy, you buy a pool of benefits which you and your spouse can split. For example, if you buy a five-year policy, you would have a total of 10 years between you and your spouse. If your spouse uses 2 years of coverage under the policy, you will have 8 years remaining. A shared care policy may cost more than separate policies for the same benefit, but it will allow you to buy a shorter term policy at less premium cost.
5) Inflation Protection: inflation protection increases the value of your benefit to keep up with inflation and is generally recommended. But you can save on premiums by choosing the method of inflation protection, e.g. based upon compound interest increases or on simple interest increases. If you are younger than age 62, you should purchase a compound inflation protection. Doing so, however, can more than double your premium. If you are older, some experts believe that simple inflation increases should be enough, and opting for this arrangement will save on premium cost.
Remember, also, that a portion of your premium may be tax-deductible, depending upon whether your total unreimbursed medical expenses are enough to meet certain thresholds for deductibility. Also, before you decide upon an insurance company, check its rating for paying claims and the historical stability of its premium adjustments over time.
When Your Most Valued Assets Are Not Covered by Your Will
May 21, 2013
Q. My wife and I hold title to her home as joint tenants, and most of our cash assets are in the form of two large IRA accounts and one big annuity. We have basic wills which leaves everything to the other and then on to our children. Our son suggested that our wills may not control what happens to our assets when one of us dies. Should we be concerned?
A. Perhaps, in the sense that you wills will not control what happens to your assets when one of you dies. Rather, the form of title will control as to your home, and the beneficiary designations on your IRA’s and annuity will control what happens to those assets.
Here is the way it works:
Your Home: Since you and your wife hold title to your home in joint tenancy, when one of you dies the other will automatically become the owner by right of survivorship. The right of survivorship is the primary feature of joint tenancy. In essence, the form of title overrides your wills. It is only when the survivor later dies that his or her will may control who ultimately gets the home. While many couples in California do hold their home in joint tenancy, it is often not the best form of co-ownership. One principal reason: it does not optimize the tax benefits that go along with holding title as ”community property” where the home has appreciated significantly in value since the time of purchase.
Your IRA Accounts: Each of your IRA accounts will, upon the death of the IRA owner, go to the primary beneficiary named in the account agreement signed when you created your IRA’s. Presumably, the primary beneficiary for each of you is the other spouse and, if deceased, your children. However, the pattern of distribution very much depends upon who you designated as primary and contingent beneficiaries when you created your accounts. It is always wise to review these designations and retain in your permanent file a copy of the documentation you signed when you created your accounts. As a lawyer, I have been involved in at least one case where the IRA custodian lost the paperwork on a very large IRA account, almost costing the designated beneficiary a six-figure tax bill because of the resulting delay in distribution. The IRS has strict rules about handling inherited IRA accounts, and these must be observed on a timely basis to avoid unnecessary tax.
Your Annuity: the person or persons to receive your annuity would, just like the IRA, depend upon who was named as the primary beneficiary and contingent beneficiaries on the annuity contract, itself. The same would be true if you owned any other insurance products or policies. Where you have designated named individuals to be primary or contingent beneficiaries, the contract or policy controls and not your will.
In view of the above, whenever clients come in to see us for estate planning, we always urge a review of all beneficiary designations associated with IRA and other retirement accounts, as well as annuities and other insurance products. Where appropriate, the beneficiary designations can then be modified, so that the plan design accomplishes the clients’ goals and everything works together. In many cases, the clients choose to name their Living Trust as the contingent beneficiary of these contracts and policies, so that the plan of distribution integrates with that created in their trust.
Your Estate Plan Can Share Your Passions As Well As Your Assets
December 30, 2012
Do you love reading and collecting books? Are you a rabid coin or stamp collector? Do you find peace and tranquility out tending your garden?
Whatever it is that you love doing; you can bet the people who love you are aware of it. These are the people who join you on your wilderness hikes; the one who might give you a rare baseball card for your birthday; or the friend who goes with you to the antique car show because he knows hobbies are better when you have someone to share them with. These friendships last a lifetime, and yet these friendships are often forgotten when people create their wills or estate plans.
Many people go to their estate planner with their descendents and their financial assets foremost in their minds, and that is as it should be; but your estate plan can be more than a just a way to distribute property to the next generation, it can also be an opportunity to say thank you to the people who have touched your life—by gifting to them meaningful representations of your hobbies and passions, and of shared experiences.
You can express how much you appreciate your best chess opponent by leaving her your favorite chess board, or encourage the interest of a young philatelist nephew by bequeathing to him your extensive stamp collection. All you need is an estate plan which includes a personal property memorandum—and which is correctly designed to recognize and refer to that memorandum.
Our office can help you create an estate plan that not only ensures the protection of your heirs and property; it also helps you leave a meaningful ‘thank you’ to the people who matter most.
Personal Care Contracts: The Hidden Solution to the Elder Care Dilemma
November 19, 2012
Caring for an aging relative is difficult—and often underappreciated—work. Many people who serve as caregivers often feel as if they have two jobs—their full-time day job at the office and the part-to-full-time job of caregiver at home. As their parents age and decline, most of these caregivers end up not only giving up more and more of their time, but also, eventually, their own opportunity for more income. Caregivers need to know that it doesn’t have to be this way; that if their elderly loved one (and perhaps the rest of the family) agree, the caregiver can be compensated according to mutually agreed upon terms of a Caregiver Agreement, also known as a Personal-Care Contract.
Elder law attorneys have known about Caregiver Agreements for a long time, but very few caregivers themselves are aware of this useful contract. A Caregiver (or Employment) Agreement serves to document a caregiver’s responsibilities and hours, and to set a rate of pay that’s in line with local practices and incomes. The contract would then be signed by both the caregiver and care recipient, and eventually shared with the rest of the family.
An agreement of this sort can be useful not only for the care-giver and the one cared-for; it also comes in handy if you think you may need to rely on Medi-Cal to cover nursing home costs sometime in the future. Payments voluntarily made to a family care-giver without a written contract would likely be viewed as gifts, potentially disqualifying the parent from a later Medi-Cal subsidy should he or she later need care in a nursing home. However, if payments to relatives are made under the terms of a written employment agreement which complies with Medi-Cal rules, the risk of disqualification from a later Medi-Cal subsidy is reduced dramatically.
Caregiver Agreements are also useful in Veterans Pension planning: qualifying payments made pursuant to a legitimate care contract may count as an Unreimbursed Medical Expense, potentially qualifying the Veteran for a monthly pension to help pay for care expenses.
It is important to remember, however, that in order for government programs to recognize an employment agreement between family members the contract must already be in place before services are rendered.
This is why it is so important to have such an agreement prepared by an Elder Law attorney knowledgeable regarding Medi-Cal rules and Veterans Pension Planning before any money changes hands. If you believe that a Personal Care Contract may be a useful tool to provide for the care of your loved one, we invite you to contact us to arrange a consultation.
Mediation Helps Preserve Family Harmony
September 1, 2012
Q. My parents are aging and I find that they are in greater need of assistance for care, paying bills, shopping, and the like. The problem is that there are four of us children and we do not always agree on what is best for mom and dad. I am concerned that, as my parents’ needs increase, the potential for family conflict will likewise increase. Do you have any suggestions as to how we might head off family conflict and do what is best for our parents?
A. Yours sounds like the ideal situation for family mediation. Mediation is a voluntary process whereby an experienced mediator helps the parties identify issues, communicate with one another in a respectful manner, develop creative solutions to their concerns and negotiate a lasting agreement that works for everyone. The mediator does not decide who is right or wrong, but is there to help the parties communicate meaningfully with one another.
The mediator may be a person trained in social work, psychology, or law. The mediator’s role is to make sure that everyone’s views are put forward and considered, including the views of your parents, and to facilitate respectful discussion to resolve a common problem.
Traditionally, mediation has seen its greatest use in the context of divorce settlements and business disputes, but its application in the elder care context is growing and it has achieved notable success in helping families resolve difficult issues amicably.
Sometimes the issues that are mediated concern suitable living arrangements for parents, allocating responsibility for care, financial and healthcare decisions, the need to make sure that the parents’ bills are paid, a parent’s unwillingness to surrender the keys to the car, and other practical problems of aging. Without a facilitator, anger and resentment may prevent resolution, and old sibling rivalries might surface in a way that is counterproductive to the parents’ best interests. Mediation can help resolve these issues in a manner that preserves the parents’ dignity and family harmony.
The process might take place in one session or, perhaps, over a number of sessions. The hoped-for result is that the parties, with the aid of the mediator, can arrive at an agreement which everyone feels is fair and appropriate. Compliance is voluntary, but a mutually agreed upon solution enjoys a high rate of success. Indeed, the process is often a “win win” for everyone, and can be a great tool in forging family consensus. As we approach the holiday season and a time when families will be together, it might be a great time to begin the process.
To learn more or to search for a trained private mediator visit: www.mediate.com or www.eldercaremediators.com. Alternatively, to search for a free or low cost community-based mediation program contact the Seeds Community Resolution Center in Berkeley at (510) 548-2377 or visit its website at www.SeedsCRC.org.
Pre-Plan Your Funeral, But Be Cautious About Pre-Payment
March 25, 2012
A funeral comes at a time when the death of a loved one is recent and close, and many people are still in shock and in some cases struggling with the reality of loss. Funerals help grieving loved ones come to terms with death and say their final goodbyes… but for the person planning the funeral the experience can sometimes be a frustrating, painful, and expensive experience. Planning ahead for your own funeral—discussing it with your loved ones and even including your wishes in your estate plan—can remove this burden from their shoulders when the time comes.
Although pre-planning a funeral is essential, pre-paying for a funeral can actually be detrimental. According to The Funeral Consumers Alliance there are just too many things that can go wrong, “[prepaying for] funerals may not cover every item of service you and your family expect, and there’s often no guarantee the money you pay today will keep up with inflation to pay the cost of the service you’ve picked out.” In addition, “many state laws don’t offer much protection for your prepaid funeral money.” If you change your mind or move out of the area there’s no assurance that you’ll get your money refunded. That being said, although pre-paying may be a no-no, setting aside funds for a funeral—in an account, CDs, or a specially designated insurance policy—is always a good idea. Consider setting aside funds in a Pay-On-Death bank account: the funds would be immediately payable on your death to someone you trust, who then would use them to pay for your funeral expenses. The POD account is sometimes called a “Totten Trust” account.
In just about every will or trust you will find something about the estate “paying the deceased’s final expenses,” otherwise known as funeral and/or memorial costs. As a small portion of what can sometimes be a very large and intricate document, this “final expense” clause can seem unimportant—but our firm knows better.
Talking about your wishes for “final disposition of your remains” is something that should always be discussed with your estate planning attorney. Whether you choose to pre-plan your funeral or not, having some basic instructions in your will or health care directive for your preferences regarding burial, cremation, organ donation and so on will be a huge help to your loved ones during a difficult and emotional time.
Consider A Pet Trust To Protect Your Furry Companions
February 20, 2012
According to a recent article on BusinessInsider.com, there are some surprising new figures about American households and their pets. “In 2011, Americans spent a record $50.8 billion on pets, according to the American Pet Products Association. We share our homes with an estimated 86 million cats, 78 million dogs, 16 million birds and 160 million fish.”
These numbers perhaps aren’t so shocking when you consider how the role of animals in our lives has changed over the past few decades. Animals have gone from being mere pets or farm animals to being companions, guides, status symbols, and in most cases beloved members of the family. As such, most pet owners want to provide for them as they would a human member of the family.
Unfortunately, as mentioned in the article, “While we may consider our pets family members, our legal system considers them property. And because estate law prohibits us from leaving property (money, real estate, etc.) to property, we must instead provide for our pets through human intermediaries.” The best way to do this is through a pet trust, in which you can nominate a loving caregiver for your pet, as well as set aside some money to be distributed to the caregiver—either in one lump sum or in smaller distributions throughout the life of your pet. Click here for an article on Pet Trusts.
A pet trust may be the most reliable way to ensure your pet will be provided for, but it certainly isn’t the only way. Another option is to simply name a caregiver for your pet in your will or trust and then include the caregiver as a recipient of funds in your will. For example: “If my cat Fluffy is alive at my death, I leave $3,000 for her care to Mary Johnson.” If you have more than one person who might serve as caregiver you should consider also naming back-up caregivers in the event that your first choice is unwilling or unable.
Pets provide so much unconditional love and support during our lives, the last thing we want is to leave them without a friend to care for them after our deaths. The next time you review your estate plan or talk to your attorney, be sure you’ve included a provision for your pet.
Off to College? Don’t Forget Your Health Directive!
August 25, 2011
The hot and lazy days of summer are almost over; parents are thinking about back-to-school sales, kids are making the most of their final days of freedom, and college freshmen are getting ready to embark on their first year of adult-hood. Most of these college students have a list (whether mental or physical) of all the things they’ll need as they leave the nest for the first time, but most of these lists will be missing two key items: A Healthcare Directive and a HIPAA Form.
You may be wondering why a college student needs estate planning documents—aren’t those just for older, established people? Not at all.
Most incoming college students are now (or will soon be) 18, and considered adults under the law. This means that hospitals and medical personnel are no longer required to ask the parent’s permission before performing medical procedures. In fact, once your child is 18 health care providers are no longer required to share information with the parents at all.
Most college students (and parents) are unaware of this side-effect of turning 18, and parents and children alike can run into frustrating roadblocks should an accident occur. You can avoid these roadblocks by simply having your young adult execute the two simple documents mentioned in this blog post.
A Healthcare Directive can be an in depth document or a very simple one, but the most important part for your new 18 year old will be the nomination of a healthcare agent. A healthcare agent is the person who will make medical decisions for your child if he or she is unable to make them alone.
A HIPPA Authorization Form addresses the issue of security and privacy of health data. In a HIPAA form your child can list the people who have permission to receive information about his or her medical records and status.
For a fledgling 18 year old these two documents are of the utmost importance, and with the right help, they are very easy to execute. Don’t wait until it’s too late; make sure your young adult has these documents completed before they leave the nest.