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Dallas Estate Planning Law Blog

Making money and long-term care the topic of conversation

Talking about money among family members is often considered taboo. Many believe it to be an uncomfortable topic. Studies show that families who are not discussing finances could make severe financial mistakes when planning for long\-term care. In Texas and other states, experts agree that talking finances while everyone is still healthy can help avoid problems down the road.

About 40 million adults in the U.S. will act as caregivers in their lifetime. Some under the age of 64 will have sacrificed careers to provide long-term care to loved ones. It is reported that 70 percent of Americans age 65 and older may need long-term care, and a portion of that burden may fall on adult children. It is essential that family members have conversations early to plan how long-term care will be covered.

Avoid probate with proper estate planning

An estate includes everything a person owns, including assets and outstanding liabilities at the time of death. Once all debts are fulfilled, what is left is known as net assets. In Texas, most people put off talking about estate planning, but by not having a plan in place, it can lead to the decedent's estate going into probate. Probate can be time consuming and expensive, but it can be avoided by utilizing one of the many financial devices available.

Joint ownership of properties gives the surviving spouse co-ownership or rights of survivorship. Having a signed beneficiary or transfer on death designation in place will cover pension payouts, IRAs, 401(k) plans, bank accounts, retirement accounts and life insurance policies. Gifting property and assets before death removes the potential for probate, but if the gifts are large, they may incur a federal gift tax. 

Supplemental insurance policies beneficial in elderly planning

Nursing homes can cost as much as $100,000 per year, and Medicare covers none of it. Without additional insurance to absorb the cost, retirement accounts will be drained quickly if seniors need in-home or nursing home health services. In Texas, it may be wise to consider long\-term care insurance when doing elderly planning.

Long-term care insurance protects seniors who are no longer capable of performing everyday activities like eating, dressing and bathing without assistance. LTC insurance can be costly, and policies have hefty premiums, so it may not be right for everyone. Policyholders are also subject to a 90-day elimination period before benefits begin. It is important to know people in poor health or with pre-existing conditions may not qualify for these policies. 

Long-term care planning for Social Security at age 70

Waiting to claim Social Security until age 70 will boost benefit amounts, but there is no reason to hold off collecting after that point. Financial incentives such as delayed retirement credits end once an individual reaches age 70. In Texas and other states, those planning for long\-term care may want to consider the advantages of waiting. 

Full monthly Social Security benefits are based on earnings and can be collected once a person reaches the full retirement age of 66 or 67, depending on birth year. Seniors who wait until age 70 can boost benefits by eight percent for each year that they hold off collecting. Statistics show that only three percent of people wait until age 70, even with the lure of free money. The most popular age is 62, even though filing early means reduced benefits. 

Long-term care planning can cause retirement stress

After many years of hard work and effort, the most rewarding part of life for seniors is the anticipation of retirement. For some, the end of careers and pending retirement can cause excessive stress. In Texas and other states, the burden of planning for long\-term care and housing are casting a shadow on retirement bliss.

The cost of healthcare for seniors often produces more anxiety than an illness itself. Studies show that the average senior couple can expect to spend on average $400,000 during retirement, and that does not include long-term care. Pre-existing conditions may cause that number to increase significantly. Elders may want to consider a Medicare Advantage plan with a broader range of coverage and less out-of-pocket expenses. Traditional Medicare does not cover procedures such as dental, vision and hearing.

Moguls estate takes almost eight years to settle

A marriage that lasted over 28 years to a titan of technology ended after the husband suffered a stroke and died at the age of 75. Stunned and shocked and finding it hard to fathom, the widow and her two stepchildren entered into an estate battle with a major financial institution that would last for almost eight years. In Texas and other states, a property can be held in financial limbo when a person dies without a will.

In 2010, the widow and children hired JPMorgan to administer the estate of their husband and father, an estate with over $19 million in property and assets. The bank charged a $230,000 fee for estate administration, and that is when the lawsuits ensued. The three heirs claim that the bank mishandled the estate, losing hundreds of thousands of dollars executing stock options and mishandling accounts.

Investments are the best inheritance gifts for heirs

Passing down learned financial expertise to children and grandchildren is a great way for families to invest in their future. Recent changes to tax laws have altered the dynamics regarding multigenerational investment planning. In Texas and other states, it makes sense for older generations to maintain control over assets to avoid burdening family members with taxes and capital gains on inheritance.

Previous laws enabled wealthy families to move assets down to future generations early in life. One reason was the immediate tax savings from transferring taxable income from parents with high incomes versus children with little or no income. The rules have changed in recent years, allowing wealthy families to escape estate tax altogether. Elders can pass down assets to their future generations in ways that can avoid capital gains.

Procrastination is one of the biggest mistakes in estate planning

Writing a will and making a list of assets to be passed along to heirs is the first step in preparing for the future. Procrastinating about estate planning is a common mistake. In Texas and all other states, not having the proper documents in place in the event of one's death means the state's intestacy laws will determine how a person's assets will be distributed.

Over time, many life changes can occur. The executor chosen years ago may no longer be up to the challenge, and incorrect beneficiary designations can cause a mountain of problems. Life insurance and retirement plan proceeds go to the beneficiary named, and the joint tenancy of assets with survivorship rights will pass straight through to the joint tenant. Regardless of what a will states, the beneficiary designations will take precedent. A benefactor should review documents periodically to make sure everything is in line.

Paying for long-term care in an assisted living facility

About 70% of seniors over the age of 65 will need long\-term care either in an assisted living facility or nursing home. Nursing homes provide 24-hour care for those who need ongoing attention and have medical issues, and assisted living facilities are for those who are still independent but need help with custodial care. In Texas, planning early for long-term care can offset costs of assisted living facilities not covered by current Medicare terms. 

Assisted living facilities across the country are a popular alternative to nursing homes for those who are still active and independent. The average cost for assisted living facilities is $3628 per month or $45,539 per year, and Medicare will cover none of it. Purchasing long-term care insurance may help defray costs, and applying sooner than later will land better health-based discounts. Purchasing coverage early will keep costs at a manageable level rather than waiting until health issues arise. 

Asset protection for spouses during long-term care planning

At some point, Medicare may not be enough coverage for elders with serious health issues. Additional coverage through the Medicaid program may help defray costs for services that Medicare does not cover. Seniors in Texas who are considering long-term care planning must be over the age of 65 and be both financially and medically qualified to receive Medicaid assistance.

Single persons who apply for Medicaid may have only $2,000 in assets to meet the asset test. Guidelines for a married couple are far different. As with single people, Medicaid looks at married couples as one unit, so neither party can transfer assets to the other to qualify for benefits. However, assets such as the primary home, one vehicle and term life policies with no cash value are exempt. Anything else is considered countable assets, and the healthy spouse can keep one half of those up to $121,000.

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Addison, TX 75001
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