| Here's how to make sure your long term care is taken | | | | grandchildren. It's pretty easy for her to see that |
| care of for the rest of your life, guarantee that you will | | | | dipping into her estate at the rate of $36,000 a year is |
| never run out of money and not disinherit your kids. | | | | not only flirting with her ability to educate the |
| A tall order, you say. Yes, but in certain situations all | | | | grandchildren, but it is affecting her other goal of |
| three of these can have a happy ending. Here's a | | | | leaving her estate to Karen and Ben. |
| more than typical scenario… | | | | Ben schedules an appointment with his personal |
| Ruth is 88. She has been diagnosed with moderate | | | | financial advisor and explains the dilemma. The first |
| Alzheimer's. Other than that, she is in pretty good | | | | thing they look at is an immediate annuity. Ruth's age |
| health for an 88 year old. Her doctor tells her she'll live | | | | would give her a good rate of return. The best quote |
| to 100. | | | | to provide the $3,000 a month short fall for as long as |
| Ruth has two children. Ben is an attorney and lives | | | | Ruth lives comes back at $215,000. |
| way across the country. Ruth has been living with | | | | The good news is that Ruth could live to be as old as |
| Karen, her daughter, and Karen's husband and three | | | | Methuselah and the insurance company would send |
| grandchildren. | | | | her a check for three grand a month. And $36,000 a |
| Ben has already set up the paperwork and has power | | | | year on a $215,000 "investment" is a 16.7% return on |
| of attorney over his mom's affairs. He has been | | | | the money. Second, this preserves the balance of |
| handling her finances for the last couple of years from | | | | Ruth's estate for her wishes. $450,000 less $215,000 is |
| afar and that has worked out fine. | | | | $235,000. That should educate the grandchildren and |
| Ruth has become more forgetful recently and that has | | | | leave a little left over for Ben and Karen. |
| become more of a concern for Karen. On top of that, | | | | The bad news is that is quite a chunk out of the total |
| Karen just got a promotion that will entail her traveling | | | | estate. And if Ruth falls and breaks a hip and dies next |
| out of town one or two days a week. She doesn't | | | | year, the insurance company keeps the $215,000. |
| feel it is right to shift the rising care needs of her mom | | | | Ben's financial advisor tells him there are ways to set |
| to her husband while she is gone. | | | | up different types of refund arrangements with the |
| Bottom line: Everyone feels it would be better to move | | | | insurance company so the whole $215,000 doesn't go |
| Ruth into a health care facility where she can be | | | | down the drain, but these options cost more. |
| effectively cared for. Even Ruth agrees as the last | | | | Is there a more efficient way? Maybe, read |
| thing she wants to do is be a burden on her family. | | | | on… |
| So Ben puts a pencil to Ruth's financial situation. Here's | | | | Insurance companies issue what are called "medically |
| what he comes up with… | | | | underwritten" annuities. Generally there is no physical |
| Ruth has about $450,000 of assets. Most of it came | | | | exam required, but the insurance company does take |
| from the sale of her home which she lived in for 45 | | | | a look at the person's medical history. The theory here |
| years. She has $800 a month coming in from Social | | | | is that people with health impairments have a life |
| Security and $1,200 a month from the telephone | | | | expectancy lower than the average for the entire |
| company pension where she was an operator for 35 | | | | population of people the same age. So providing the |
| years. | | | | same monthly benefit can be provided with less |
| Karen has found the ideal care facility for her mom. It | | | | money. |
| is close to their home and it provides all the care Ruth | | | | That's exactly what happened when Ben's financial |
| would ever need for the rest of her life. The problem | | | | advisor put in an inquiry on Ruth's situation. $3,000 a |
| is that it cost $5,000 a month. So she is short to the | | | | month for life would take only $130,000. |
| tune of $3,000 a month. | | | | So the shortage of $3,000 a month was taken care |
| But the problem goes deeper than that. | | | | of. Ruth won't ever run out of money. Now there is |
| Even though Ruth has assets totally $450,000, it's | | | | $320,000 to educate the grand kids and leave the rest |
| possible that she could eventually exhaust these funds. | | | | to Karen and Ben. Nobody gets disinherited and Karen |
| After all, other than Alzheimer's, she has no major | | | | and Ben heave a sigh of relief knowing they will never |
| problems. What if her doctor is right and she does live | | | | have to use their own money to provide for Ruth is |
| to 100? | | | | she lives as long as they hope. |
| Karen and Ben love their mother and hope she lives to | | | | Robert D. Cavanaugh, CLU is a 36 year financial and |
| be 120, but these are simply the economic realities. | | | | estate planning veteran and author of the free |
| However, there is another problem. Ruth's life-long goal | | | | newsletter, "The Estate Preservation Advisor". |
| has been to be the one that educates her three | | | | |