The long term care elephant
There’s been lots of discussion about long term care in recent years, and for good reason, as this is a very important and expensive issue especially when we consider the possibility that you will live a long time. You should review your own needs in this regard, but my emphasis here is not your care, but on your spouse’s needs. Here are the facts: as long as Medicare lasts in its current guise, it will pay for decent long term care for those who need it. But the catch is that “needing it” means that your joint assets have been spent down to the poverty level. That means that you – and only you – are responsible for the costs of your spouse’s care until the money’s nearly gone. That could leave you without adequate funds to support yourself, and could even push you toward the poverty line, whether you need care or not. Take note: existing Medicaid laws require most couples’ assets to be completely drained before paying for long term care. Given the current debt issues in the United States, it is likely these laws will get even tougher. Fortunately, you can deal with this issue by using insurance and some more advanced estate planning techniques. The time to plan is now, before the dice break the wrong way and before your retirement dreams are potentially shattered.
Can professional financial planning increase retirement income?
A number of academic studies are concluding that financial planning offers sound value that helps clients get wealthier faster. For instance, Texas Tech – a national leader in advanced financial planning education – released a study (Martin & Finke, 2013) which concluded that a “comprehensive” professional financial planning approach consistently resulted in higher retirement wealth (three times as much 1 or more) and higher savings rates (more than twice as much 1 or more). The authors emphasize that these results were not observed with “non-comprehensive advisors” which they describe as non- fiduciary salespeople, and note that their “results demonstrate the importance of differentiating between advisors whose primary objective is to sell a (often underperforming) financial product verses advisors who create a comprehensive plan.” For more information on this study or about better planning in general, click on one of our FREE report offers on this website’s front page. 1 90 th quantile, pp 36-7 referenced paper)
The dangers of amateur estate planning
I’m not talking about wills and trusts prepared by specialized estate attorneys. I’m more concerned about the do-it- yourself variety that can have unforeseen consequences that can be devastating. Below are a couple of quick examples among many. My objective is not to cover them all, but encourage you seek advice from a competent estate planner. If you decide to take us up on our free offers mentioned below and want some guidance in this area, we will be very happy to provide it. This is such an important part of your overall plan!
A big mistake is putting bank and brokerage accounts in joint names with your children. This is not the best way to leave money to them when you die. Use POD designations or wills/trusts instead. One reason is simple: If your child is sued, goes through a divorce, or has another legal issue – auto accident, for instance –accounts so titled are on the table and could be lost to both you and your child. Beyond this, there control, divorce risk, and other pitfalls to avoid.
Another mistake is not using a living trust – combined with a proper power of attorney – where you have a lot of your family’s assets on which you depend for retirement income in one spouse’s name, like in an IRA or 401(k). These accounts can’t be titled in joint names. If, for example, your spouse loses competency and a judge appoints a guardian, there is no assurance that the guardian is going to see that your needs are met. His or her duty lies elsewhere. There are many other dangers that can lead to being locked out of important retirement assets, but the cure is simple – get a proper estate plan. In many cases, the cost of the work will be returned dozens – if not hundreds – of times in saved probate costs and taxes, not to mention the inestimable value of dodging the kind of bullets we’ve been discussing here. And if you are concerned about asset protection from financial predators – and you should be! – estate planning is a very effect time to address this as well. If we get a chance to sit down with you sometime, ask for a copy of my Advanced Asset Protection for Successful Families report – with my compliments!