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Costs Associated with Second Marriages

Costs Associated with Second Marriages

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Most people wouldn’t think of losing their assets to pay for their new spouse’s serious illness when they get married for a second time (or more). But that could happen. Costs for long-term care have been rising significantly for years and continue to grow. Studies show that 70% of Americans will need some form of long-term care. Which can last for three years or longer. It is important to be aware of the costs associated with second marriages.

Paying for Long-Term Care While Protecting Assets

If one spouse becomes ill, the assets of both spouses are, by and large, required to be spent on the ill spouse’s care before Medicaid benefits become available. This could be a big problem. Especially if the money that the healthy spouse had saved for their children’s inheritances goes to pay for the ill spouse’s care instead.

With careful planning, this need not happen. Making financial arrangements in advance can protect the estates of both spouses to ensure they can retain the assets they brought with them to the marriage.

Medicaid Community Spouse Resource Allowance

Medicaid rules allow the healthy spouse to keep an allowance of a certain amount for their benefit. This is known as the Medicaid Community Spouse Resource Allowance (CSRA). But many find that the CSRA is too small to permit the healthy spouse to maintain their standard of living, pay for their retirement, and still have something for their children to inherit.

Any planning or shifting of assets must be done very carefully and only after consulting with an attorney experienced with Medicaid planning. Medicaid heavily penalizes transfers of assets made as gifts.

Medicaid Planning

Assets can be protected, though, by using strategies that are permitted by the Medicaid rules. Some, or all, of the healthy spouse’s assets could buy a Medicaid-compliant annuity. This would provide an income stream for the healthy spouse that will not be deemed available to pay for the ill spouse’s care.

In turn, the assets of the ill spouse could be transferred to people they trust, such as a trustee, an agent for financial affairs, a family member, or a beneficiary. That kind of transfer may be subject to a penalty, depending on when the transfer is made and when long-term care benefits are received. Planning well in advance, at least five years, helps mitigate Medicaid penalties.

There are also long-term care insurance products available to cover the costs of long-term care services. Which everyone should consider when newly married and while they are still reasonably young and healthy.

The best strategy of all, though, is to consult an attorney experienced with Medicaid as soon as possible. The sooner you start planning, the more options you have and the more money you can save. Contact us today to schedule a consultation to learn how we can help you prepare for your future.

Our law firm is dedicated to informing you of issues affecting seniors who may be experiencing declining health. We help you and your loved ones prepare for potential long-term medical expenses. Also, the need to transition to in-home care, assisted living care, or nursing home care.

This article offers a summary of aspects of estate planning and elder law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact our Ruston, LA office by calling us at (318) 255-1760.

Common Mistakes in Special Needs Planning

Common Mistakes in Special Needs Planning

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Statistics show that 26% of American adults live with some form of disability–  more than you might think. However, federal and state benefits, such as Medicaid and Supplemental Security Income (SSI), are available for persons with special needs. These benefits are “needs-based,” which means the amount of assets and income the beneficiary can have are very limited.

When planning for a loved one with special needs, you must ensure they don’t receive money or other assets thatcould cause disqualification from their government benefits. Here are some common mistakes in special needs planning.

Gifts

Gifts of money or assets from well-intentioned family members or friends can disqualify a loved one with special needs from government benefits. This would cauwe their countable assets to exceed the acceptable limit. After getting disqualified, it can be difficult to requalify for benefits. It’s better to have gifts go to a special needs trust or a similar financial planning tool set up for the benefit of the recipient.

Disinherit

Some parents believe if they disinherit their child with special needs, that child’s siblings will help take care of them for the remainder of their life. This plan puts a lot of responsibility on the other siblings and can fall apart for many reasons. If the inheritance is in the siblings’ names, it could be lost due to divorce, lawsuits, bankruptcy, or irresponsible spending. Additionally, Louisiana’s forced heirship laws can foil such a plan. Forced heirship requires that a special needs child (or grandchild in some circumstances) must received a certain amount of a decedent’s estate after he or she dies.

Lack of a Trust

Failing to create a special needs trust for your loved one with special needs is a common mistake.  Government benefits are used for basic living expenses, such as housing, food, and medical care. Therefore, a person with special needs usually won’t have enough money for other expenses, such as travel and hobbies. Creating a special needs trust can make funds available for expenses that government benefits don’t cover.

Crowdfunding

Similar to gift-giving from family members and friends, donations from a crowdfunding campaign can negatively affect your loved one with special needs. By pushing their countable assets over the acceptable limit. If you want to create a crowdfunding campaign to benefit your loved one with special needs, find a way to keep the funds out of your loved one’s name. Again, a special needs trust could be a good option.

Consult an Attorney

The best way to avoid making mistakes that could cause your loved one with special needs to lose their government benefits is to consult with an attorney experienced in elder law and estate planning. They will be able to help you find the best solution for your particular situation.

Our law firm is dedicated to informing you of issues affecting persons with special needs. We help you and your loved ones plan for the best possible future. Contact us today to schedule an appointment.

This article offers a summary of aspects of estate planning and elder law. It is not legal advice and does not create an attorney-client relationship. For legal advice, contact our Ruston, LA office by calling us at (318) 255-1760.

Helping Retirees Offset Inflation

Helping Retirees Offset Inflation

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Inflation will continue to rise well into 2023 and beyond without significant course corrections. Bankrate’s Third-Quarter Economic Indicator poll projects inflation will be more significant than previous expectations over the coming twelve to eighteen months. Even in the best economic outcomes for 2023, maximizing allowable benefits to offset inflationary pressures is a smart strategy.

Rising prices may create a gap between your income plans and real bill-paying requirements. Withdrawing higher amounts from retirement savings can affect your retirement plan’s long-term sustainability. When planning bill pay strategies, remember prices typically don’t rise evenly across all sectors. Medical care costs have risen significantly in recent decades yet rose slower than overall inflation at 4 percent in the past year. However, fuel, food, and utility costs are up sharply for the same period.

Targeting a level of growth that exceeds an already accounted-for level of inflation is part of a good retirement strategy. Still, it can’t account for short-term excessive inflationary pressures. Taking distributions in the short term must remain in balance with maintaining long-term investment growth to preserve retirement income. There are steps you can take to achieve this balance.

Budget Review and Adjustment to Short-Term Spending

Finding ways to cut costs is the easiest way to avoid taking increased distributions or asset spending. Conserve energy use in your home and group errands that require car transportation to like locations to reduce gasoline use. In inflationary times, trimming discretionary expenses like dining out, vacations, or home renovation can help your budget. If you are already tightening your budget with these techniques, you may consider picking up some part-time work to close the income gap without upending your retirement planning.

Ensure Proper Wealth Allocations

Historically, stocks averaged annual returns to stay ahead of inflation. A balance of cash, bonds, ETFs, value stocks with dividends, and market sector investment rotations help maintain financial stability in uncertain times.

The S&P 500 is the lowest in a decade, decreasing over 17 percent. However, the Great Recession of 2007-9 saw the index down 38.4%. Historic market trends indicate that bullish investors will return to the stock market by mid-2023. Not assessing historical trends and re-adjusting your portfolio can make you miss a big chunk of the recovery and potential gains.

This graph of model asset allocations from T. Rowe Price’s investment strategy for retirees can help guide retirement investment strategy by general percentages.

T.Rowe Price

Maintain an Appropriate Stash of Cash

Managing short-term income with long-term growth makes a regular review of your plans necessary. Investing is never a set-and-forget process since personal needs change, corporations’ profitability fluctuates, and market realities change according to economic conditions. Particularly in the equities market, investing trends cycle by market sector. Even though inflation will reduce the spending power of cash on hand, cash availability is crucial for those unavoidable and unforeseen expenses.

Generally, a healthy cash position can cover one to two years of expenses in early retirement and keep you from withdrawing from your longer-term investments. This is particularly true when periods of inflation coincide with the declining market value of your investments.

Maximize Your Social Security Benefits

Work longer to obtain the maximum Social Security will pay based on your best thirty-five years of income. Earning more money to pay into the system will yield a larger payout (up to a point) when you claim your benefits. Delay your benefits up to age seventy, and you will receive a higher monthly payment.

During inflationary times, Social Security benefits automatically adjust to ensure purchasing power adjusts for inflation. If you have not yet claimed your benefits, remember the COLA maintains your benefits to adjust for inflation. When you are ready to claim your benefits, there are options depending on if you are married or divorced. Spouses and ex-spouses must carefully consider scenarios, particularly regarding survivor’s benefits, when one spouse predeceases the other. Divorced from a ten-year marriage for a minimum of two years and still single? You may be entitled to file for benefits based on an ex-spouse’s earnings. Bankrate reviews scenarios for Social Security spousal benefits.

Consider Inflation as You Update Broader Financial Plans

Effective retirement strategies rely on accurate estimates of household spending and adaptation to new norms. This number will change yearly, particularly in an inflationary environment. Your retirement strategy will require adjustments depending on personal circumstances, market conditions affecting your investments, and prevailing inflation rates.

As retirement planning links closely to your overall estate and legacy planning, it is crucial to coordinate the two. An estate planning attorney or an elder law attorney can help to ensure any trusts you create will have sustainable funding and make other recommendations about retirement plans and how they affect your estate planning goals.

Working with a financial professional or using financial planning tools while creating your estate plan can provide insights. As inflation continues to present economic challenges for household expenditures, it’s important to review your existing retirement plans regularly, as you do for your estate plan. Ultimately, an appropriate allocation in stocks that receive a regular review in combination with managed spending and flexibility provide the most important tools retirees

Contact our Ruston, LA office by calling us at (318) 255-1760 to speak to one of our experienced estate attorneys. We can work with your financial advisor to develop the best financial solutions for retirement.

Coverage for Long-Term Care

Coverage for Long-Term Care

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The improvement in medical care and healthier lifestyles are making people live longer. Because of this, more of us will need some form of long-term care in our later years. As a result, the cost of long-term care has been rising. Wharton estimates nursing home costs will increase by 4.7% and home health care by 6.9% by 2030.

Many seniors will receive some long-term care services from relatives, friends, or neighbors. However, many others will need professional help, whether in their home, an assisted-living facility, or a nursing home. There are different ways to pay for these types of long-term care. If you are able to plan well in advance for your long-term care needs, long-term care insurance could be a good option.

Traditional Long-term Care Insurance

Traditional long-term care insurance policies are similar to health, home, or auto insurance policies. You typically pay the insurance company regular premiums to keep the policy in effect and file claims. If you need them to pay for services your policy covers.

Like health insurance policies, you can choose the amount and types of coverage you want your long-term care insurance policy to cover. Policies state how much reimbursement you can receive on a daily or monthly basis over a certain number of years or up to a lifetime maximum. You may be allowed different amounts depending on the care you are receiving, such as care in your home or nursing home.

Another policy feature you may get to choose is the waiting period between when you start needing care and when you start receiving benefits. Ninety days is a typical waiting period; however, you can pay more to start receiving benefits after 30 days, or you can pay less and wait 180 days before benefits start.

What Long-term Care Insurance Covers

The long-term care insurer will dictate what they will cover and what they won’t cover. Some conditions are often not covered by insurers, such as alcoholism and drug addiction. Some preexisting conditions, such as heart disease or cancer, may not be covered right away. If you have a preexisting condition, find out if the insurer will cover needs connected to that condition before you sign up.

Generally, you can be eligible for benefits when you can no longer perform a certain number of daily living activities. This can be such as eating, dressing, getting into and out of chairs and beds, bathing, and using the toilet. Often you won’t need to pay premiums while you are receiving benefits.

Usually, you’ll lose your coverage if you stop paying your premiums before you need to receive benefits. Unfortunately, you don’t get your premium payments back if you never use the coverage. The insurance company keeps the money.

Hybrid Policies

Many long-term care policies these days are combined with other benefits, such as life insurance. These policies are referred to as hybrid or linked-benefit policies. For this type of policy, you will likely pay a lump sum or several fixed annual payments.

With a hybrid policy, you will get coverage similar to what you would get with a traditional policy. In addition to an amount of life insurance that will go to your heirs if you don’t use the long-term care benefits. If you do need to use the long-term care benefits, the life insurance payout would be reduced or eliminated. This extra flexibility usually comes with a higher premium.

Consult with a Professional

There are many factors to consider before committing to a long-term insurance policy. You may determine that you don’t even need one. Do an ample amount of research and talk with an insurance professional or an elder law attorney.

Our law firm is dedicated to informing you of issues affecting seniors who may be experiencing declining health. We help you and your loved ones prepare for potential long-term medical expenses and the need to transition to in-home care, assisted living care, or nursing facility care. Contact our office today to learn how we can help you afford the right level and best quality of long-term care.

This article offers a summary of aspects of elder law. It is not legal advice and does not create an attorney-client relationship. For assistance, please contact our Ruston, LA office by calling us at (318) 255-1760.