Long-Term Care Options and How to Plan for the Costs

Think for a minute about all the things you did when you woke up this morning. You probably got out of bed, walked to the bathroom, cleaned yourself up, brushed your teeth, got dressed, made yourself some breakfast, and headed out the door to go to work. These activities of daily living are so routine, you likely did them without even thinking about it.

Now imagine that you couldn’t do these things on your own. It could be because you’ve had an accident, you’re recovering from an operation, or you have an illness that limits your mobility. Whatever the reason, you now need help from another person to do many or even most of your basic daily activities — and you’ll continue to need it for weeks, months, or even years.

This kind of help is called long-term care, and there’s a good chance you or a close loved one will need it at some point in your life. According to the U.S. Department of Health and Human Services (HHS), a person who turned 65 today has almost a 70% chance of needing some form of long-term care in the future.

Needing long-term care isn’t just a physical burden; it’s a financial one too. According to the 2020 Cost of Care Survey by Genworth Financial, professional long-term care can cost anywhere from $1,603 to $8,821 per month. Most employer-sponsored health insurance plans don’t cover these costs, and even Medicare provides only limited coverage.

If you don’t want to risk being bankrupted by long-term care costs in the future, you need to do some planning now. Even if you don’t think you’ll need long-term care for many years to come — or at all — it’s better to think about it ahead of time than to take a chance on having to deal with both a health crisis and a financial crisis at once.

Options for Long-Term Care

When many people hear “long-term care,” they immediately picture a nursing home. However, it’s possible to receive long-term care in a variety of settings, which differ widely in terms of both comfort and cost.

The main forms of long-term care are:

1. In-Home Care From Relatives

Dealing with a long-term injury or illness can be a lot less stressful in your own home with familiar things and people around you. Thus, one common type of long-term care is to have a relative or friend tend to your needs at home.

While unpaid in-home care is easiest on the person receiving care, it can be difficult for the caregiver, both emotionally and financially. A 2018 Genworth study found that more than half of family caregivers had high levels of stress, and roughly one-third said their careers had suffered on account of their caregiving duties.

2. Home Health Aides

If you want to receive care at home without putting a burden on your relatives, you can hire someone to help you. A home health aide doesn’t provide medical care but can help with such daily tasks as bathing, dressing, and eating. The 2020 Genworth survey found that the median cost of a home health aide in 2020 was $24 per hour, or $4,756 per month.

3. Homemaker Services

Some people don’t need help with bathing or dressing, but they still need someone to handle daily chores they can’t manage on their own, such as cooking, cleaning, and running errands. For this, you can hire a homemaker service, which costs a bit less than a home health aide. Genworth put the median cost of homemaker services for 2020 at $23.50 per hour, or $4,481 per month.

4. Adult Day Care

Some older people can still get up and about, but they can’t be on their own for long periods of time. An adult day care program is a place where adults can go during the day and spend time with others, with a caregiver there to keep an eye on them. Adult day care programs can offer structured activities, meals, transportation, and sometimes health services. They’re cheaper than most long-term care options, at around $74 per day or $1,603 per month, according to Genworth.

5. Assisted Living

Home health aides can help with daily activities, but they can’t provide actual medical care. People who need regular medical supervision are better off moving to an assisted living facility. This is a place where people can live on their own in private apartments and have access to both personal care and medical care on site. The median cost for an assisted living facility was $4,300 per month in 2020, according to Genworth.

6. Nursing Home

Nursing homes provide the highest level of supervision and care. These all-inclusive facilities offer room and board, personal care, supervision, activities, medication, rehabilitation, and full-time nursing care. This level of care comes with a high price tag, however. Genworth found that in 2020, a semi-private room in a nursing home cost $7,756 per month, and a private room cost $8,821 per month.


Government Programs

Most Americans can’t afford to pay for professional long-term care out of their own pockets. A 2020 survey by The Ascent found that over half of Americans have less than $5,000 in savings. Roughly one-third have less than $1,000 — not enough to pay for even a single month of long-term care.

Government programs, including Medicare and Medicaid, can help you meet some of the costs. However, these programs offer only limited aid. Each one has specific rules about who qualifies for benefits, what services it covers, how long you can receive aid, and how much you must pay for on your own. If you need long-term care, it’s certainly a good idea to look at these programs first to see what they cover, but it’s a mistake to rely on them to pick up the whole tab.

Medicare

In most cases, Medicare does not include any long-term care benefits. However, there are several specific exceptions:

  • Skilled Nursing Facility (SNF) Care. If you come out of the hospital after a stay of at least three days, Medicare provides partial coverage for up to 100 days’ worth of medically necessary care while you recover. To receive this coverage, you must enter a Medicare-certified SNF or nursing home within 30 days after you leave the hospital. Medicare covers all of your treatment there for the first 20 days of your stay. Beginning on day 21, you must pay a daily copayment, which is set at $185.50 in 2021. Medicare covers any cost beyond this copayment up through day 100. If you still need care after that, you’re on your own.
  • Rehabilitation. If you have a condition that requires ongoing medical care to help you recover, Medicare provides partial coverage for a stay in an inpatient rehabilitation facility. It covers the cost of treatments such as physical therapy, meals, drugs, nursing services, and a semi-private room. However, you must pay an out-of-pocket cost for this care that depends on the length of your stay. For the first 60 days, you pay a $1,364 deductible. This cost is waived if you’ve already paid for a hospital stay for the same condition. For days 61 through 90, you pay $341 per day. After day 90, you start using up your “lifetime reserve days.” You have only 60 of these days over your lifetime, and each one costs you $682. If you still need care after your 60 days are used up, you must pay the full cost. Also, any extra costs during your stay — such as a private room, private duty nursing, or a phone or television in your room — are your own responsibility.
  • Home Health Services. You can also use Medicare to pay for in-home care for a specific illness or injury. This includes part-time or intermittent skilled nursing care, physical or occupational therapy, and speech-language pathology. To qualify as part-time, your care must cover less than eight hours per day, or less than seven days per week, over a total of three weeks or less. If you are receiving this type of in-home care, Medicare also pays for additional, basic care from a home health aide. Medicare does not cover care from a home health aide if that’s the only care you need, and it does not cover homemaker services under any circumstances.
  • Hospice Care. People who are terminally ill sometimes choose to spend their last days in hospice care. Hospice treatment focuses on relieving the patient’s pain, rather than trying to cure them. Medicare covers hospice care for patients who are terminally ill, are not seeking a cure, and do not expect to live more than six months. Patients can receive this kind of care in their own homes, a hospital, or another inpatient care facility.

For more details about what Medicare covers, see the Medicare website.

Medicaid

Unlike Medicare, Medicaid covers all types of long-term care. This includes both in-home care — such as a visiting nurse or a home health aide — and care in facilities such as nursing homes. You can get home health aide services from Medicaid even if you don’t need skilled care as well, and you can get care in a facility even if you aren’t recovering from a hospital visit.

However, Medicaid has strict limits on eligibility. You can’t receive Medicaid benefits if your income is above a certain level, which varies from state to state. Also, in some states, you cannot qualify unless you have dependent children. You can find the limits for your state through your state’s Medicaid website.

Veterans’ Benefits

The Department of Veterans Affairs (VA) covers the full cost of long-term care for veterans who have disabilities resulting from their military service. It also covers costs for veterans who can’t afford to pay for their own care. Other veterans receive some coverage, but they must pay a copayment. According to the VA site, the current copayments for long-term care are:

  • $97 per day for inpatient care, such as nursing home care
  • $15 per day for outpatient care, such as home health care or adult day care
  • $5 per day for domiciliary care in a special facility for homeless veterans

The VA site has more information about the health benefits available to veterans and how to qualify for them.

OAA Programs

Some states have their own separate programs to help provide care for adults over age 60. These programs get funding from the federal government under the OIder Americans Act (OAA). The OAA supports a wide network of state, local, and tribal agencies called the Aging Network. It works with tens of thousands of service providers and volunteers to deliver various types of care, including:

  • Meal delivery
  • Transportation
  • Home health services
  • Home health aide and homemaker services
  • Adult day care
  • “Respite care,” which gives family caregivers some time off from taking care of an older relative
  • Help using other government benefits

You can find programs in your area through Eldercare.gov.


Products to Help You Pay for Long-Term Care

Government programs don’t cover everybody, and the coverage they offer isn’t always enough to pay for the full cost of long-term care. To make up the difference, some people carry long-term care insurance, which provides coverage for this specific type of care. Others rely on other financial products designed for senior citizens, such as annuities and reverse mortgages, to cover their costs.

Long-Term Care Insurance

Long-term care insurance, or LTC insurance, works like other types of insurance. You pay a premium each month to the insurer, and if you ever need long-term care, it covers the cost. However, one big difference between this and most other types of insurance is that you have to qualify to buy a policy. If you’re already in poor health, there’s a chance you won’t be able to get a policy — and if you do, you’ll have to pay a steep price for it.

There are several ways to buy a long-term care insurance policy. The most common sources for policies are:

  • Insurance Specialists. You can buy LTC insurance through financial professionals such as insurance agents, brokers, and financial planners. To find insurance companies that offer LTC insurance, visit your state insurance department or do an Internet search for “long-term care insurance” plus the name of your state.
  • Employers. Although standard employer-sponsored health care plans don’t cover long-term care, many employers — including the federal government, many state governments, and some private companies — offer LTC insurance as an add-on that employees can purchase separately. To find out whether your employer offers this coverage, check with your pensions or benefits office.
  • Organizations. Some labor unions and other professional or trade organizations, such as the National Education Association, offer LTC insurance as a benefit to their workers. Membership organizations such as alumni associations or service clubs like the Lions and Elks can also take part in group plans.
  • State Partnerships. In some states, you can purchase LTC coverage through a State Partnership Program. These programs provide benefits partly through private long-term care insurers and partly through Medicaid. You can learn more details about these programs from the Department of Health and Human Services (HHS).

Although long-term care coverage can protect you from devastating long-term care costs, most Americans don’t carry it because of its high cost. According to the American Association for Long-Term Care Insurance (AALTCI), the typical annual premium for an LTC policy ranges from $1,400 to $3,100. This annual cost varies based on factors such as age, health, gender, location, and amount of coverage.

Financial planner David Demming, speaking with Policygenius, says LTC insurance is most likely to be a good deal for people aged 50 to 55 with a net worth between $1 million and $3 million. That’s enough money to afford the premiums, but not enough to cover the full cost of long-term care. To get a clearer idea of what LTC policy pricing could be for you, check out online calculators like this one from Genworth.

Annuities

Some people choose to fund their long-term care through an annuity, a financial product that pays out a fixed sum every year over a specific period. There are three kinds of annuities you can use for this purpose:

  • Immediate Annuities. With an immediate annuity, you pay a one-time premium, and in exchange the company pays you a fixed monthly benefit. This benefit can last for a specific period of time or the rest of your life. One advantage of an immediate annuity is that anyone can buy one, regardless of health status. This makes it a good option for people who no longer qualify for LTC insurance due to poor health. However, the fixed monthly sum you get might not be enough to meet your long-term care costs, and inflation can eat into its value.
  • Deferred Annuities. You can buy a deferred annuity with either a one-time payment, like an immediate annuity, or a series of regular payments. The money you pay into the annuity earns interest and grows tax-free. It doesn’t start paying out a monthly benefit until a specific date, such as your 65th birthday.
  • Long-Term Care Annuities. A long-term care annuity is a deferred annuity with a long-term care rider. This type of annuity doesn’t pay out until you need the money for long-term care costs. To collect the monthly payment, you must be diagnosed with a medical condition that requires long-term care, such as Alzheimer’s disease. According to HHS, this type of annuity is usually available only to people age 85 or younger who meet certain health requirements. However, according to SmartAsset, it’s sometimes easier to get approved for a long-term care annuity than for LTC insurance.

Depending on your situation, an annuity can be a cheaper way to cover long-term care costs than LTC insurance. However, it typically requires a large up-front payment, which is even higher if you already have health issues. Also, annuities can have a complicated effect on your taxes — HHS recommends consulting a tax professional before you buy one.

Reverse Mortgages

Another way to pay for long-term care services is with a reverse mortgage through LendingTree. This is a special type of home equity loan available only to homeowners age 62 and up, which allows you to get cash out of your home without giving up your title to it.

The house remains your property until you die. At that time, it goes to the bank unless your heirs choose to pay off the amount you’ve borrowed and keep the house. Otherwise, the bank sells the house and keeps the amount you owed at the time of your death. Any cash beyond that balance goes to your heirs.

There are several ways to get cash from a reverse mortgage. You can get one large lump-sum payment, a regular monthly payment, or a line of credit you can draw on as needed. The second two options are most useful for paying long-term care expenses. As long as you spend the payments in the same month you receive them, the money is not taxable income and doesn’t affect any government benefits, such as Social Security, Medicare, or Medicaid.


Long-Term Care Planning

Dealing with long-term care can be an emotional and financial burden, both for you and for your family. The best way to lighten that load is to plan ahead. By making your plans early, you’ll have plenty of time to do research, make decisions, and buy traditional long-term care insurance or any other products you need to cover the costs.

1. Research Your Options

Start by looking into the options for advanced care in your area. Check the phone book or do an online search to find out what choices you’re likely to have for assisted living and nursing homes, as well as home health aide and homemaking services. The Genworth Cost of Care Survey tool can help you estimate what these services cost now and what they’re likely to cost in the future. You can also check the costs for services in other areas to figure out whether relocating would save you money.

2. Talk to Your Family

Once you have some idea of available options, talk to your family members and get their input. Set aside a time when you can talk everything over in person without having to rush. Here are some points to discuss:

  • Your Lifestyle. Discuss the way you live now and how you expect to live in the future. For instance, if it’s important to you to stay at home and live independently, let your family know that. Tell them about your priorities, and find out what’s important to them, as well.
  • Your Care Options. Show your family the research you’ve done on care options in your area. Tell them how you’d prefer to receive care and whether you have a specific provider in mind. Also, find out how much of your care your loved ones are able and willing to take on themselves. If you have several relatives who could help you, talk about which specific responsibilities each of them could handle.
  • Your Finances. Once you’ve considered what kind of care you want, talk about what it’s likely to cost. Let your family know how much money you can set aside now toward your future care needs, and find out if any of them are willing to contribute.
  • Medical Care. Make sure your family knows your health history in detail so they can supply it to a doctor if they need to. Also, make sure they know how to contact all of your current medical providers.
  • Legal Issues. Decide who should be responsible for making medical decisions for you if you can’t make them yourself. Use this information to set up a durable power of attorney for the future. Also, talk to your loved ones about your wishes for end-of-life care. If you already have a living will, tell them what it says and where to find it; if you don’t have one, make plans to set one up.

3. Calculate the Cost

Now that you have some idea who will provide care for you when you need it, the next step is to figure out how much it will cost. Even if your family has offered to provide unpaid care for you when you need it, there could still be some cost involved. For instance, you could choose to hire a house cleaning service so your loved ones won’t be responsible for all the housekeeping chores in addition to your care.

If you’re planning to pay for professional long-term care services, think about how long you’re likely to need them. According to the HHS, people who require long-term care use it for an average of three years. This includes an average of two years of in-home care and one year in a long-term care facility. About one in five people need care for more than five years.

To figure out the total amount you’ll need for long-term care costs, multiply the cost by the expected length of care. For instance, suppose a home health aide costs $60,000 per year and assisted living costs $90,000 per year. If you expect to need two years of home health care and one year in assisted living, you must save up a total of $250,000.

If the total cost looks like more than you can possibly afford, look for ways to save on long-term care. This could include relying on family care, negotiating prices, getting help from government programs, or relocating to a cheaper area.

4. Make a Plan to Cover the Costs

Once you have an idea of how much money you’ll need for long-term care, you can start figuring out how to pay for it. If your income and assets are low enough, you can look to Medicaid for help when you need care. State government programs could also provide some help.

By contrast, if you have a lot of liquid assets — that is, cash, retirement savings, and other assets you can easily convert to cash — you might be able to pay for your care out of pocket. Financial planners interviewed by Policygenius say this is most practical for people with a net worth of at least $3 million.

If you’re somewhere in between those two extremes, you’ll need some other way to meet the costs of long-term care. That could mean buying long-term care insurance, investing in an annuity, or taking out a reverse mortgage. A financial planner can help you compare these options and decide which one is best for you.

5. Put Your Plan in Writing

After you’ve come up with a plan to meet your long-term care needs, the final step is to put it in writing. Having a written plan gives your family something to consult if there’s ever any confusion or uncertainty about your wishes.

If you’ve decided to make a living will or set up a durable power of attorney, these documents should be part of your written care plan. Consult a lawyer to help you set these up. Give a copy of the entire plan, including the legal documents, to any relatives it could affect.

Putting your plan in writing doesn’t mean it’s set in stone. If your health or financial situation changes in the future, your long-term plans might need to change too. Update your plan as needed, and make sure your relatives always have the latest version.


Final Word

If you’re young and healthy, you may feel like it’s too soon to start thinking about long-term care. Since you probably won’t need it for many years, you figure you can just wait and deal with it when the time comes.

However, there are several good reasons why now is exactly the right time to think about it. First of all, the future is unpredictable. Even young people can suffer injuries or develop illnesses that keep them off their feet for months.

Also, LTC insurance gets more expensive and harder to obtain as you age. If you decide to wait until you’re 65 before buying a policy, it could already be too late to qualify. And even if you can get one, you’ll pay a much steeper rate for it than you would if you’d bought it 10 years earlier. So it makes sense to start thinking about this type of insurance and decide whether it’s for you before you hit age 55.

Finally, if you put off thinking about long-term care until you actually need it, you’ll have to make a whole lot of important decisions in a hurry. You could end up making choices that aren’t best for you because you don’t have time to weigh the options. By avoiding procrastination and thinking it through now, you can ensure that when — or if — you finally need long-term care, it will be as easy as possible for you and your family.

Source: moneycrashers.com

Ex-Mortgage Pro Awaiting Fraud Sentence Was Avid Art Collector

Former mortgage broker Chris Schaller, who pleaded guilty to wire fraud in 2020 and has yet to be sentenced, owned more than 100 paintings by folk artist George Colin. So reports the Illinois Times.

Dozens of those paintings now reside in the office of a Springfield, Illinois lawyer who fought Schaller in court for years.

Other reputed owners of works by Colin, who died in 2014, include Oprah Winfrey and Michael Jordan.

Read the full article from the Illinois Times.

Source: themortgageleader.com

Vice President Kamala Harris Sells Her San Francisco Condo for a Big Profit

The nation’s newest vice president is unloading her San Francisco condo—and she’s getting a very good price.

Vice President Kamala Harris signed a deal to sell her 1,069-square-foot loft for $799,000, about 63% more than what she paid for it in 2004, according to the Wall Street Journal. The one-bedroom,1.5-bath property is located in a boutique building in San Francisco’s hot South of Market neighborhood. It was on the market for less than two weeks before it went under contract.

Harris bought the two-floor condo nearly 17 years ago for $489,000. That was when Harris became the state of California’s first Black district attorney.

Kamala Harris is in contract to sell her San Francisco condo.
Kamala Harris is in contract to sell her San Francisco condo.

realtor.com

The home is located on the top floor of the building. It boasts a high ceiling accentuating the floor-to-ceiling windows, an alcove that could be used as a home office, and a walk-in closet. Other details from the listing include a chef’s kitchen with a gas stove, fireplace, and full-size washer and dryer. It also has what appears to be a private patio.

Other perks include garage parking with additional storage space.

The building is just a block and a half from a Whole Foods location.

The one-bedroom, San Francisco condo that Harris is selling is set up as a loft.
The one-bedroom, San Francisco condo that Harris is selling is set up as a loft.

Harris now lives across the street from the White House in Blair House, the president’s official guesthouse. The brick-and-stucco home has 14 bedrooms,  35 bathrooms, three formal dining rooms, a gym, and even a beauty salon.

She is expected to move into the vice president’s typical residence, on the grounds of the U.S. Naval Observatory, when repairs are completed.

The vice president also owns a two-bedroom condo in Washington, DC, and a 3,500-square-foot house with a pool in the upscale Brentwood neighborhood in Los Angeles.

She reportedly paid $1,775,000 for the 1,700-square-foot condo in DC’s West End neighborhood in 2017, according to the Journal. The complex offers a 24-hour concierge at the front desk, a dog washing station, and a heated rooftop pool with a sundeck.

The four-bedroom, five-bathroom house in Los Angeles was purchased by her husband, entertainment lawyer Doug Emhoff, for $2.7 million in 2012. The couple were married in 2014.

This is the exterior of the San Francisco building where Harris’ condo is now under contract

realtor.com

Source: realtor.com

How to Make a Living Will

How to Make a Living Will – SmartAsset

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A living will is a legal document that allows you to specify the kind of care you’d like to receive in end-of-life situations. This is different from an advance healthcare directive, though either one can be an important part of an estate plan. If you’d like to draft a living will, you could get help from an estate planning attorney or you may try using an online software program to create one. Regardless of which one you choose, it’s important to understand how to make a living will to ensure that yours is valid and your wishes are upheld. A financial advisor can offer valuable insight and guidance as you make an estate plan.

What Is a Living Will?

Living wills can be used to spell out what type of healthcare you do or don’t want to receive in end-of-life situations or if you become permanently incapacitated or unconscious. This document tells your doctors and other healthcare providers as well as your family members what type of care you prefer in these situations.

For example, you can include instructions in your living will regarding things like resuscitation, life support and pain management. If you don’t want to be left on life support in a so-called vegetative state, you could communicate that in your living will. Or if you’re terminally ill and only want to receive palliative care you could include that as well.

A living will can be part of an advance healthcare directive that also includes a healthcare power of attorney. This type of document allows someone else, called a healthcare proxy, to make medical decisions on your behalf when you’re unable to. A living will typically only applies to situations where you’re close to death or you’re permanently incapacitated while an advance directive can cover temporary incapacitation. So if you’re unconscious after a car accident, for instance, your healthcare proxy could direct doctors regarding what type of care and treatment you should receive.

How to Make a Living Will

The first step in making a living will is deciding whether you want to do it yourself or hire an estate planning attorney. Making a living on your own using an online software program may cost less than paying an attorney’s fee. But if you want to be certain that your living will is drafted accurately and legally, you may feel more comfortable getting help from an estate planning professional.

If you choose to make a living will on your own, you can find the necessary forms online. Keep in mind that your state may have a specific form you’re required to use for your living will to be considered valid. There may also be minimum requirements, in some cases identical to what would be required for a simple will, you’ll need to meet to make a living will in your state, including:

  • Being at least 18 (or 19 in some states)
  • Being of sound mind
  • Having the will be properly witnessed
  • Getting the document notarized once it’s complete

Those are the technical aspects of how to make a living will. Your main focus may be on what to include. Again, your state may have a specific format you’ll need to follow. But generally, you’ll need to leave instructions regarding the following:

  • Life-prolonging care. You’ll need to decide what types of life-prolonging treatments, such as blood transfusions, resuscitation or use of a respirator, you do or don’t want to receive.
  • Intravenous feeding. You’ll also need to specify whether you want to be given food and water intravenously if you’re incapacitated and can’t feed yourself.
  • Palliative care. If you’re facing a terminal illness, palliative care can be used to manage pain if you decide to stop other treatments.

It’s important to be as thorough and specific as possible when outlining your wishes so there’s no confusion later on. This ensures that your wishes are carried out and it also relieves your loved ones from the burden of having to guess at what you do or don’t want.

What to Do After Making a Living Will

If you’ve drafted a valid living will according to the laws of your state, the next step is to make your wishes known to other relevant parties. This includes passing copies of your living will to your doctors, hospital and loved ones. If you’re drafting a living will as part of an advance healthcare directive, you’d also want to make sure your healthcare proxy has a copy.

It’s also important to review your living well regularly to make sure it’s still accurate. If you change your mind about the type of care you’d like to receive, then you’d want to update or rewrite your living will to make sure that’s reflected. If not, then your doctors and loved ones would be left to carry out the terms of your original living will, which may conflict with what you actually want.

Who Needs a Living Will?

A living will is designed for people who have specific wishes regarding care in situations where they have a terminal illness or become permanently incapacitated. If you’re comfortable letting your loved ones decide which type of care should be given to you, then a living will may not be necessary. On the other hand, if you absolutely don’t want a certain type of treatment then a living will is the best way to make that clear to your doctors and family members.

You might consider drafting a living will along with a healthcare power of attorney to ensure that all of the bases are covered, so to speak, when it comes to healthcare decision-making. Having a healthcare proxy can ensure that the terms of the living will are upheld and they can also make decisions about your care for you in situations where you’re only temporarily incapacitated. When choosing a healthcare proxy, it’s important to select someone you can rely on to adhere to your wishes.

The Bottom Line

A living will can be an important part of preparing your family for your death. This kind of document is a relatively straightforward legal document that you may consider including in your financial plan or estate plan if you have specific wishes regarding end-of-life care. Knowing how to make a living will and what it covers can help you decide if it’s something you need to have in place.

Tips for Estate Planning

  • A living will is not the same thing as a last will and testament. Living wills cover healthcare decision-making while a last will and testament deals with the distribution of your assets once you pass away. A will is important to have, since without one your assets are distributed according to the inheritance laws of your state. An estate planning attorney can help you draft a last will and testament as well as a living will. Or you can use online will-making software programs to create a simple will on your own.
  • Consider talking to a financial advisor about whether a living will is something you need. If you don’t have a financial advisor yet, finding one doesn’t have to be a complicated process. SmartAsset’s financial advisor matching tool can get you personalized recommendations, in minutes, for professional advisors in your local area. If you’re ready, get started now.

Photo credit: ©iStock.com/GCShutter, ©iStock.com/zimmytws, ©iStock.com/FluxFactory

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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Source: smartasset.com

Estate Planning Checklist: 5 Tasks to Do Now, While You’re Still Well

It’s difficult to think about what may happen if your health starts to decline — or how your loved ones will carry on after your death. But doing nothing to plan for these events could result in you losing control over your affairs while you’re still alive, and undesired confusion and anger after you’re gone.

You can help prevent these unwanted consequences from occurring by making these decisions while you’re still healthy, documenting them, and communicating them in advance to your loved ones. While there are many issues to think about, here are four decisions you should move to the top of your priority list.

1. Documenting Your Health Care Wishes

It’s important to make sure family members and friends are aware of your medical treatment wishes before a health care crisis takes these decisions out of your hands. Fortunately, there are ways you can formally document these directives in writing so there’s no misunderstanding.

Health care proxies

A health care proxy, also known as a medical power of attorney, is a legal document that authorizes one or more people to serve as health agents who can make medical decisions on your behalf should you become physically or mentally incapacitated.

Most people assign their spouse or partner as their primary health care agent and one of their children or a close family member or friend as an alternate agent should the primary agent pass on or also become incapacitated.  Generally, each state has its own health care proxy/power of attorney forms.

A living will

These legal documents allow you to specify which kinds of treatment and long-term care options you prefer. In the form, you specify whether or not you wish a physician to employ resuscitation procedures, ventilators, tube feeding or other life-sustaining procedures.

Medical Orders for Life Sustaining Treatment (MOLST)

Also called a physician orders for life-sustaining treatment (POLST), this form is a set of medical orders signed by a doctor for patients after they’ve been diagnosed with advanced illness who could die within the next few years. You can create this form even if you’re not ill. It will only go into effect if you’re facing an end-of-life situation.

Most states have their own form, which must be signed by you and a physician. Unlike a living will, it is not generally considered a legal document. Instead, it is a doctor’s order.

Organ donations

If you’ve never registered as an organ donor with your state, you can do it online. Start at www.organdonor.gov/register.html to connect to your state’s donor registry. 

Interment agreements

If you’ve already made arrangements with a funeral home or a cemetery, make sure your loved ones are aware of this.

Note that some states have comprehensive Advanced Healthcare Directive forms that allow you to designate health care agents, specify treatment preferences, and authorize organ donations in a single document.

Once you’ve filled out any of these forms, make several copies and give them to your chosen health care agents and your estate attorney. While you don’t necessarily have to give them to your children, friends or family members, you should consider discussing your directives with them.

2. Choosing an executor 

The executor will be responsible for managing the distribution of assets in your estate. These could include your home, your non-retirement investments, your vehicles and other valuable items.

Your executor doesn’t have to be a legal professional. As long as you’ve assigned an estate attorney to do the heavy lifting, anyone can serve as executor, including your children, a family member or a close friend.

If you ask a non-professional to serve as executor, make sure they understand their responsibilities. It could take months or years for your estate to be settled. During this time, your executor may need to have multiple in-person meetings with bankers, appraisers, attorneys and state and local officials.

Once you’ve chosen an executor it’s a good idea to introduce them to your estate attorney, even if it may be years or decades before they’ll have to work together. And remember that you can change your executor — or add a co-executor — at any time.

Whomever you choose for this role, make sure your heirs are aware of this decision.

3. Protecting Your Financial Interests

Many parents don’t want their heirs to know how much they’re worth — or how much they may inherit. It’s perfectly acceptable to keep this information close to the vest, but it may be a good idea to set their expectations, especially if they believe they’re going to receive much more than you intend to give them.

There are additional steps you should take to protect your financial security.

Assign a financial power of attorney

At some point, you may want to fill out a financial power of attorney form to give control of your finances to others, should you no longer be able to manage them yourself. Like a health care proxy, usually a spouse or partner is assigned as a primary proxy, with a child or other family member or close friend as an alternate.

Anyone can serve in this role, but preferably they should have a strong understanding of personal finance and investing. Should a health care crisis require them to intercede on your behalf, they’ll need to make critical decisions that may involve significant adjustments of your investment strategy and accelerated withdrawals from your banking and investment accounts to fund your medical and long-term care expenses.

Once you assign financial power of attorney, give this person an overview of all of the assets held in your banking and investment accounts as well as any outstanding debt obligations. Also consider introducing them to your financial adviser, accountant or estate attorney so they can get to know each other before a crisis requires them to start working together.

Discuss your trust

If you’ve placed most of your assets in a trust to remove them from your estate, make sure your heirs understand this decision.

This kind of disclosure is particularly important if you’ve transferred your home, vehicles, private business shares, artwork or jewelry to the trust and have instructed the trustee to sell these assets after you and your spouse or partner have passed on. Your heirs may be upset by these decisions, but at least they’ll know in advance that they shouldn’t expect to take ownership of these assets.

Examine tax issues for beneficiaries

While the beneficiaries of your trust generally won’t have to pay taxes on the value of the principal they receive after you’re gone, they may have to pay taxes on any earnings or income they receive.

Also, if you plan for your heirs to inherit any money remaining in your 401(k) or traditional IRA, make sure they’re aware of this, since they may have to pay taxes on any required distributions or withdrawals from these accounts. If you’re able to convert some or all of these assets to a Roth IRA while you’re still alive, your heirs won’t have to pay any federal taxes on distributions or withdrawals from balances they inherit. But you will have to pay taxes on the amounts you convert, so it’s up to you to decide whether to take the “Roth conversion tax hit” yourself, or avoid converting and let your heirs deal with the tax consequences after you’re gone.

4. Finalizing Your Will

Hopefully, you’ve written a will that clearly specifies how your assets will be distributed. You may be hesitant about discussing it with your heirs, but you should consider doing so, especially if they’re under the mistaken assumption that they’ll be inheriting the bulk of your estate.

If this isn’t true — for example, if you plan on leaving most of your wealth to charity — then it may be better to inform them of this decision sooner rather than later.

5. Creating a ‘Need to Know’ File

Once you’ve made these critical decisions, it’s important to communicate them ahead of time to those who will be most impacted. If you don’t feel comfortable talking about these issues in person, consider recording a video where you explain your wishes and tell them what steps you’ve taken to document them.

Make it easy for people to access the information they need to carry out your wishes by creating a comprehensive “end of life” file. It should include:

  • Copies of your health care and financial proxy forms.
  • Copies of your life insurance policies.
  • Contact information for your primary care physician, medical specialists, attorney, accountant, financial adviser, life insurance agents or any other professionals they may need to contact in a health care emergency or after your death.
  • At least one copy of your bank, investment, mortgage and loan statements.
  • A list of all your credit card numbers and any associated PINs needed to access these accounts.
  • User names, password and personal identification numbers for all of your online accounts, including social media accounts.
  • Any interment agreements you’ve already made with a funeral home or cemetery. 
  • The location of vehicle titles, deeds, mortgage documents and past tax returns and records.
  • If you’re a business owner, copies of any business succession plans and the location of ownership-related documentation.

Thinking through these end-of-life issues can cause a great deal of anxiety. But if you can make and communicate these discussions while you’re still physically and mentally healthy, you’ll help make it easier for your loved ones to deal with these issues when the time comes.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

Financial Adviser, Partner, Canby Financial Advisors

Joelle Spear, CFP® is a financial adviser and a Partner at Canby Financial Advisors in Framingham, Mass. She has an MBA with a finance concentration from Bentley University.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Financial planning services offered by Canby Financial Advisors are separate and unrelated to Commonwealth.

Source: kiplinger.com

Chapter 13 Bankruptcy – What It Is & How It Works

petition for bankruptcy

Who is eligible for Chapter 13 bankruptcy?

Chapter 13 bankruptcy is reserved for individuals and couples, as opposed to corporations and partnerships. You’re most likely eligible assuming you have received credit counseling and possess a regular income sufficient for your living expenses.

Additionally, your secured debt must be less than $1,257,850 and your unsecured debt should be less than $419,275. If you had a bankruptcy petition that was dismissed with prejudice or for abuse in the last half-year, you cannot file until the 180-day waiting period has expired.

How does Chapter 13 bankruptcy work?

You and your lawyer will file all the necessary paperwork, such as the petition, a statement of financial affairs, the schedules, and your plan of reorganization.

You will pay a number of fees and possibly meet with your creditors, but your attorney will handle most details. If you plan to file on your own, you should be aware that the failure rate is very high.

In most cases, it’s highly recommended to hire a qualified bankruptcy attorney. Once your paperwork is submitted, your documents will then be reviewed by the Chapter 13 trustee and creditors. After that, you’ll begin your repayment plan.

Rather than discharging debts as in a Chapter 7 bankruptcy, Chapter 13 bankruptcy creates a multi-year repayment plan. You’re given a monthly payment amount based on your disposable income and necessary financial obligations.

That amount is then distributed amongst your qualifying unsecured creditors. You then have three to five years to resolve your debts. After you successfully complete the Chapter 13 repayment plan, your debts are fully discharged.

The entire process typically takes between three and five years of structured payments that are applied to your debt adjustment. Some debts won’t qualify for discharge, including federal student loan debt.

What will my duties be under chapter 13 bankruptcy?

Beginning April 1, 2019, when filing for Chapter 13, expect a certain amount of requirements to maintain your eligibility. For example, you must:

  • File all required tax returns before your creditor’s meeting
  • Send all creditors a notice of your bankruptcy
  • Maintain child support and alimony payments during your plan
  • Make all payments to the trustee during your adjustment period
  • Make all payments for agreed upon secured loans, such as your house and cars
  • Meet new tax obligations and not incur significant new consumer debt
  • Provide the trustee with annual tax returns and information changes in income
  • Get court approval for any new loan, or for buying, selling, or refinancing a home
  • No more than $419,275 in unsecured debts
  • No more than $1,257,850 in secured debts (including mortgages and car loans)

What is a trustee and what is their role?

The trustee is a representative of the bankruptcy estate who works for the bankruptcy court and the federal government to review bankruptcy petitions and schedules.

This person generally handles most of the issues related to the processing and approval of bankruptcy cases. The trustee also acts as the disbursing agent for your payments and provides oversight on issues that might arise.

What is the role of my attorney?

In Chapter 13 bankruptcy, your bankruptcy lawyer generally analyzes all the particulars of your situation and prepare your estate, allowing you to keep as much of your property as possible. He or she will assemble all your information and data and handle your court paperwork and deadlines.

Your attorney will prepare your petitions, schedules, and statements for filing, draft your plan of reorganization, and help you understand your duties. Attorneys will also meet with your creditors, attend hearings and address issues with the trustee.

Additionally, attorneys will make necessary petitions and modifications if you need to change your Chapter 13 plan. They are now more liable for inaccuracies and other problems that could arise in connection with your Chapter 13 case.

This means that many of the burdens of bankruptcy are taken off you and become the attorney’s responsibility.

Attorney’s fees vary from state to state but expect to pay anywhere between $1,200 and $2,500. Given the level of responsibility they carry on your behalf, it’s well worth the investment.

How does Chapter 13 bankruptcy affect my credit?

Chapter 13 bankruptcy will be publicly listed on your credit report for a total of seven years, during which time your credit will be negatively affected.

However, your score will slowly increase as you establish a positive payment pattern during your adjustment period, and it will continue to increase as long you keep up with your payments.

You can also expect an increased difficulty in obtaining credit. If you do qualify for a credit card or loan, you’ll pay some of the highest interest rates on the market.

You’ll also only qualify for smaller credit amounts so it will become especially important to save up cash reserves to have on hand for any financial emergencies that pop up.

What are exemptions in Chapter 13 bankruptcy?

Under Chapter 7, every state has a list of exemptions for things that don’t need to be sold to pay back creditors.

Usually, there is a monetary limit for each category of property you own, whether it’s your home, your car, or your household possessions. Under Chapter 7, your creditors have the right to liquidate assets not protected by this exemptions list.

In Chapter 13, however, instead of having those items liquidated, you must pay to creditors, as part of your adjustment plan, their full value. To fully understand how exemptions work in your situation and state, it’s helpful to talk to a lawyer.

What if I am self-employed or a business owner?

If you are self-employed or operate your own business, you must file a monthly financial report or business operating statement with the trustee before the 15th day of each month.

You’ll also need to verify your income before you file for Chapter 13 bankruptcy. If you own your own business, it’s even more important for you to maintain thorough documentation of your financials both before and during Chapter 13 bankruptcy.

What if I can’t continue to make all my payments?

If a situation arises under Chapter 13 in which you’re unable to make all your required monthly payments, you must show that it results from a serious income change or a necessary expense. Your lawyer must then file a moratorium with the bankruptcy court and creditors, which is subject to approval by the trustee.

In most Chapter 13 cases, you should be able to get approved for some type of catch-up plan, including lengthening your repayment term if you’re just suffering from a short-term financial setback.

For a long-term issue, you can apply for a modification. In the event of a severe hardship that makes it impossible for you to make your Chapter 13 payments, you can request a hardship discharge.

Another option is to convert your bankruptcy to a Chapter 7 and have your remaining eligible debts discharged. This is only possible if your new financial situation meets the income qualifications for Chapter 7 bankruptcy.

A final option is to dismiss your current Chapter 13 and file for a new one. Just make sure you request an automatic stay from the court to ensure creditors don’t resume their collection attempts as you pivot to a new bankruptcy plan.

Should I file for Chapter 13 bankruptcy?

There’s no right or wrong answer to this question. One of your first steps should be to undertake free credit counseling to see if you can figure out a manageable debt payment plan that works for your current situation. If not, you should then seek professional legal help.

It’s great to read up on the pros and cons of bankruptcy, but at the end of the day, so much depends on your personal situation. From your money to your state, there are countless small details that could influence what it means to take the best course of action.

Source: crediful.com

Starting a Business With a Friend: 4 Things to Consider

The ultimate question: Could you and your friend make the perfect business duo? The answer may be more complicated than you think. You love spending time with your friend and the idea of becoming entrepreneurs together. Why not fulfill your dreams with each other? Companies like Airbnb and Ben & Jerry’s had success in this area — they all started from friendships.

But much more goes into starting a business with a friend. You may make great business partners, or you could wish you had taken your venture solo. Before making any financial decisions, analyze the pros and cons and ask hard questions. For example, will you equally invest? Who will take on which tasks and responsibilities? Sift through the easy and hard questions to see where your business friendship lies.

To help you and your friend make a confident and informed decision, skip to our flowchart or keep reading.

karen-gordon-quote

Questions to Ask Before Going Into Business With a Friend

Before jumping into your business plan, ask the hard questions. These can be tough to ask and answer, but they could save your friendship from a business relationship gone sour.

Question 1: Do You Share the Same Values?

Depending on your life stage and goals, your values could differ greatly from those of your potential business partner. You may appreciate living a relaxed lifestyle that gives you the financial freedom to do what you love, while others may value a fast-paced lifestyle filled with activities and long workdays. Differences in values could spark tension in your business relationship.

Ask yourself: Do you and your potential business friend have the same values? If so, great! If not, note your differences and if they’re worth working through.

Question 2: Do You Share the Same Business Goal?

To make sure you’re on the same page, schedule a brainstorming session with your friend. Map out your one-month, six-month, one-year, and five-year goals for your startup. Is your goal to make a certain amount of revenue? To hire a certain number of full-time employees? Or to take your business idea global?

If you have the same intentions, move on to question three. If any of your goals contrast, there may be trouble in paradise. See if you can work through your differences before investing your time and money.

Question 3: Do Your Skills Complement Each Other?

You and your friend each have your own strengths For example, you may be good at time management while your friend is better at sales. For skills you’re both lacking, think about how you’ll fill in the gaps. If you and your friend’s startup plan has a budget for hiring freelancers, or one of you has the dedication to learn something new, this may not be a concern. No matter what, especially if you’re bootstrapping your business idea, it’s essential to talk through it.

If you don’t compliment each other’s needed skills, who will step up and learn them?

Question 4: Do Your Career and Lifestyle Habits Align?

Depending on your business goals, this could be a make or break question for a professional partnership. For instance, one friend may be a morning person while the other’s a night owl. One can take over morning meetings and emails while the other’s responsible for evening website development and customer service.

If one friend’s lifestyle habits don’t suit the other, it may be best to opt for other business opportunities. While starting a business could adjust your habits, it’s easy to fall back into old ones from time to time.

baylie-carlson-quote

The Pros and Cons of Doing Business With Friends

Before entering any business arrangement, it’s reassuring to weigh the pros and cons. Could your new business idea benefit or hinder your future relationship and career?

Pros: You Have a Friend Through the Ups and Downs

Starting a business with a friend is similar to marriage — you’re there for each other through the good and bad. Whenever you’re having trouble, you know who you can go to for help. And you’ll be able to do most tasks together. For example, approaching investors as a team vs. going solo could put your nerves at ease.

Cons: You Know the Same People

Instead of getting together for your weekly catch-ups, you could spend all day together! While this can be exciting, it can also be hard to leave work at work. When you both hang out with the same people, there may be little room to disconnect from each other and your business.

Pros: You Understand Each Other’s Strengths and Weaknesses

You likely already know how each other operates and your strengths and weaknesses. Instead of learning the way a new business partner functions, you already have the upper hand. On day one, you and your partner could delegate tasks that fit everyone’s strengths best.

Cons: Your Friendship Could Turn Strictly Business

Your current friendship can be hard to separate from your new work partnership. Taking your work too seriously could stiffen your current relationship. Even after your work’s done, “friend” time may slow down. To have the best of both worlds, over-communicate throughout your entrepreneurial adventures.

mike-falahee-quote

Pros: You Feel Comfortable Communicating

You may have been friends for months, years, or even decades. Having a strong friendship foundation helps bolster your communication in the workplace. Plus, you most likely know how your friend may react to a situation gone wrong. Take note of your friends’ communication habits and foster them throughout your business relationship.

Cons: It’s Easy to Let Emotions Get the Best of You

Be careful not to let your emotions dictate your business decisions. A situation could happen in your friend group that makes its way into the office. To avoid any personal matters in the workplace, come to an agreement — no drama. If situations arise, take some time off to clear your mind, rest, and come back more motivated and inspired.

Pros: You Get to Spend More Time With Each Other

You get to spend countless hours talking and doing business activities together. You could spend all day tackling business tasks and wrap up the workday chit-chatting about your lives. It’s an amazing opportunity to spend more time with your friend without letting other responsibilities slip through the cracks.

Cons: Friendship Failure Could End in Financial and Business Failure

When tension builds in the workplace, it could damage your business outcomes. Not wanting to attend a meeting with your partner could halt business productivity, or worse, end it. To avoid losing profits on your friendship and investments, you should both outline an exit plan if things go wrong.

Tips for Starting a Business With Your Friend

Before toasting to your other half and investing in your passions, properly prepare yourself. Show up to your new business like you would a new job. Have your plan documented before building your business empire.

1. Nit-Pick Your Business Plan

Small issues could grow months or years after starting your business. To avoid future problems, talk through small and large inconsistencies with your partner. Having different lifestyle habits may not be an issue now, but could be difficult after a year of working together.

2. Communicate Often

About one third of projects lack proper communication. Avoid project or business failure by finding a communication method that works for you and your partner. Daily catch-up meetings or weekly email updates are a few examples. Make it enjoyable by sipping your favorite coffee or eating your lunch while playing catch up.

3. Establish and Honor Boundaries

Eliminate tension in the workplace by setting a rubric for working hours. Avoid talking about personal matters until you step away from your work tasks. If you and your partner need to establish additional boundaries, clearly outline them as they come up.

4. Make it Official With Contracts

Once you’ve worked through any complications, put it all in writing. If things were to go wrong, documents and written statements can be referenced in court. To do this, contact a lawyer and draft up a business plan. Any business promises you make should be in writing for any miscommunications. Compensation rates, profit shares, investment contributions, and business accounts are a few things that should be listed on this document.

Before investing your time, energy, or money into your startup dreams, make sure you’re fully prepared. Could you and your friend be great business partners? Take our quiz below to find out. Don’t forget to keep track of your budget and investments throughout the startup process.

should-you-start-a-business-with-a-friend-ig

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Source: mint.intuit.com