After the Baby Boomers take care of their parents’ in their last years, they start to focus on how they will pay for the care that they will need when they are old and infirm. Are you in your 50s or 60s? Do you have a plan for paying for the care that you and your spouse will need in your later years? Do you have any idea how much it will cost?
Health insurance or Medicare will not pay for someone to help you get dressed or bring you to the bathroom. Medicaid will not pay for those types of services unless you are absolutely poverty-stricken. Assisted-living in New Jersey can cost over $100,000. If you or your spouse get Alzheimer’s disease, you can be looking at 5-10 years of needing care. Do you have that kind of nest egg?
Long-term care insurance is usually obtained when you are healthy and don’t need it. As a matter of fact, you must pass a physical exam for an insurance company to offer you the insurance. If you can’t pass the physical or you are past the age limit, the insurance company may not want to insure you. Or they may charge you such a high premium that you cannot afford it. That is why the insurance agents urge you to start thinking about it when you are in your 50s.
Long-term care insurance is not for everyone but it is worth it to talk to an insurance agent who specializes in this type of insurance. You want to ask them about what type of coverage you are buying (nursing home only or it will also pay for care in your home or adult day care centers). Will the coverage start immediately or will you have to wait before the insurance starts paying. Typically, different waiting periods mean different premiums like getting a high deductible on your car insurance. How much per day does the policy pay out and will that amount pay for the total costs? This issue is hard to evaluate since you are buying coverage that you may not use for 20 or 30 years. Who knows how much your care will cost so far in the future. Many policies come with inflation riders. If you don’t get an inflation rider, you may be paying a large chunk of the long-term care out of your own pocket. How long will your policy pay out? You can choose a set number of years or until you pass on. Obviously, the longer the insurance policy pays out, the higher the premium. Will you need to be hospitalized before the insurance coverage starts? Many times, you need help when you can’t remember things and walking or feeding yourself becomes too difficult.
Compare policies to see which offers the coverage you want and has the best premium to pay for the coverage. It is possible that you will never need long-term care insurance. But there are many scenarios in which this type of policy will be very needed. And assume that, unless you are very wealthy, you will not be able to save enough to pay for your care. For those of you thinking that your children will take care of you, please think through the scenario of your child taking you into the shower and washing you, taking you to the bathroom and wiping your bottom. Many of us don’t want our children to see us that close and personal. Until another alternative comes along, long-term care insurance should be at least considered, even if you decide that it’s not right for you and your family.
Monday, May 18, 2009
Wednesday, May 13, 2009
Why Do I Need to Know About Asset Protection and How Do I Use It In My Estate Planning?
We love our children and want to make sure that they are taken care of even after we’re gone. That’s why so many of us want to leave an inheritance to our children. But how do we protect them from spending it on expensive cars, extravagant vacations, and extended shopping sprees?
Even if you don’t have a large estate to hand down to your children, how do you think an extra $50,000 or $100,000 would change their lives? Do you think that they would all invest the money wisely so that your grandchildren will have college funds and your kids will have comfortable retirements? Or do you think one or more of them will immediately run out to buy a fancy car or several pairs of expensive shoes?
Asset protection is the legal way to put assets beyond the reach of those who would like to take them away from their owners. Your estate planning lawyer knows of different ways to shield money from your children’s wasteful spending habits. In other words, you can protect your kids from themselves. That’s one reason for asset protection.
Another reason that you may want to explore asset protection tools is that your child’s spouse can go after your child’s inheritance in the event of a divorce. Typically, assets inherited by one spouse during the marriage cannot be claimed as a marital asset to be divided during a divorce settlement. However, typically, while the marriage is going well, your child will want to share his inheritance with his spouse and kids (your grandchildren) and will spend part or all of it for the good of his family. Or maybe he will commingle his inheritance with his family’s other investments so that the inheritance can no longer be considered a separate and distinct asset of your child. All of your children may seem to be in happy marriages right now but who can say what will happen in 5 years? In 10 years?
Another possible concern that you may have about your child losing the money you pass on to him is if he is sued. Does one of your children own his own business? People sue businesses all the time and your child has to follow all the rules of limited liability to ensure that only the company assets are at risk and not his personal assets as well. How does a business owner make sure that his personal assets aren’t at risk if his business is sued? Is the business a corporation or a limited liability company? These forms of running a business are the starting point for ensuring that your child’s personal assets don’t get seized by someone suing his business. Is your child a doctor or lawyer who could be sued for malpractice? Then, he may possibly get sued individually for malpractice and his personal assets are at risk.
Even if your children don’t own their own businesses, they can get sued for any number of reasons. If your child is in a car accident and the judgment is bigger than the amount of insurance he carries, the judgment can be satisfied from your child’s personal assets (including the money you leave to him). If someone slips and falls on his lawn and then sues, the injured person can collect against any of your child’s personal assets.
In order to be effective, asset protection techniques must protect against liability, must not be in your child’s name, and must be done at the right time. Talk to your estate planning lawyer about how to help your children’s spending or losing their inheritance.
Even if you don’t have a large estate to hand down to your children, how do you think an extra $50,000 or $100,000 would change their lives? Do you think that they would all invest the money wisely so that your grandchildren will have college funds and your kids will have comfortable retirements? Or do you think one or more of them will immediately run out to buy a fancy car or several pairs of expensive shoes?
Asset protection is the legal way to put assets beyond the reach of those who would like to take them away from their owners. Your estate planning lawyer knows of different ways to shield money from your children’s wasteful spending habits. In other words, you can protect your kids from themselves. That’s one reason for asset protection.
Another reason that you may want to explore asset protection tools is that your child’s spouse can go after your child’s inheritance in the event of a divorce. Typically, assets inherited by one spouse during the marriage cannot be claimed as a marital asset to be divided during a divorce settlement. However, typically, while the marriage is going well, your child will want to share his inheritance with his spouse and kids (your grandchildren) and will spend part or all of it for the good of his family. Or maybe he will commingle his inheritance with his family’s other investments so that the inheritance can no longer be considered a separate and distinct asset of your child. All of your children may seem to be in happy marriages right now but who can say what will happen in 5 years? In 10 years?
Another possible concern that you may have about your child losing the money you pass on to him is if he is sued. Does one of your children own his own business? People sue businesses all the time and your child has to follow all the rules of limited liability to ensure that only the company assets are at risk and not his personal assets as well. How does a business owner make sure that his personal assets aren’t at risk if his business is sued? Is the business a corporation or a limited liability company? These forms of running a business are the starting point for ensuring that your child’s personal assets don’t get seized by someone suing his business. Is your child a doctor or lawyer who could be sued for malpractice? Then, he may possibly get sued individually for malpractice and his personal assets are at risk.
Even if your children don’t own their own businesses, they can get sued for any number of reasons. If your child is in a car accident and the judgment is bigger than the amount of insurance he carries, the judgment can be satisfied from your child’s personal assets (including the money you leave to him). If someone slips and falls on his lawn and then sues, the injured person can collect against any of your child’s personal assets.
In order to be effective, asset protection techniques must protect against liability, must not be in your child’s name, and must be done at the right time. Talk to your estate planning lawyer about how to help your children’s spending or losing their inheritance.
Tuesday, May 5, 2009
Per Stirpes and Other Legal Terms
When you consult an estate planning attorney, she might be using legal terms that you don’t know. It is best if you ask her to explain everything so that you know that you understand everything that she is telling you. However, here are a few legal terms that she might mention and what they mean.
Estate – the assets you own less the debts that owe at the time that you die.
Per stirpes – is a method for distributing your estate. It divides a family into branches. Typically, a share of the estate will go to one of the persons in each of the branches. If that person has already died when it comes time to inherit, that person’s children will inherit the share and divide it among themselves. For example, if you leave your estate of $450,000 to your 2 children, and Child A has 1 child and Child B has 3 children, if Child B dies before you do, the 3 children of Child B will divide Child B’s ½ share of $225,000 among themselves (so each child of Child B gets $75,000). Child A will inherit the other ½ share of $225,000.
Per capita – the other method for distributing the estate of a deceased individual. If we use the previous example of you and your 2 children, and Child B has died before you, when you die, there are 4 people to divide your estate – Child A and your 3 grandchildren from Child B. Child A and the three grandchildren from Child B each take a ¼ share of your estate.
Executor – the person whom you appoint to carry out the wishes that you state in your will. The job requires that person to submit the will to the court for probate, to find all of your assets, to pay your debts, and then to distribute the estate in accordance with the terms of the will.
Fiduciary – a person who acts for the benefit of others in a trust relationship. Examples of fiduciaries are your executor (or administrator if you died without a will), trustee, and guardian of your children.
Letters Testamentary – the formal court order issued by the probate judge giving the executor the power to act on behalf of the estate.
Estate taxes – there are federal estate taxes and New Jersey estate taxes. The taxes are assessed on your estate based on the size of your estate when you die. In 2009, you can die (in most cases) without paying any federal estate tax if your estate is $3.5 million or smaller. In New Jersey, the state estate tax is assessed if your estate is greater than $675,000.
Ancillary probate – a probate proceeding conducted in a state other than the one in which you lived and where you own property. For example, if you are a New Jersey resident and you have a vacation home in the Poconos, your primary probate will take place in New Jersey and your executor will need to start an ancillary probate in Pennsylvania to get the court order that allows the transfer of your vacation home according to the terms of your will.
There are other legal terms that your lawyer will reference. If you don’t know the meaning of any term of concept that she discusses, you should ask for an explanation. After all, it’s your estate plan and you want to be sure that it carries out your wishes.
Estate – the assets you own less the debts that owe at the time that you die.
Per stirpes – is a method for distributing your estate. It divides a family into branches. Typically, a share of the estate will go to one of the persons in each of the branches. If that person has already died when it comes time to inherit, that person’s children will inherit the share and divide it among themselves. For example, if you leave your estate of $450,000 to your 2 children, and Child A has 1 child and Child B has 3 children, if Child B dies before you do, the 3 children of Child B will divide Child B’s ½ share of $225,000 among themselves (so each child of Child B gets $75,000). Child A will inherit the other ½ share of $225,000.
Per capita – the other method for distributing the estate of a deceased individual. If we use the previous example of you and your 2 children, and Child B has died before you, when you die, there are 4 people to divide your estate – Child A and your 3 grandchildren from Child B. Child A and the three grandchildren from Child B each take a ¼ share of your estate.
Executor – the person whom you appoint to carry out the wishes that you state in your will. The job requires that person to submit the will to the court for probate, to find all of your assets, to pay your debts, and then to distribute the estate in accordance with the terms of the will.
Fiduciary – a person who acts for the benefit of others in a trust relationship. Examples of fiduciaries are your executor (or administrator if you died without a will), trustee, and guardian of your children.
Letters Testamentary – the formal court order issued by the probate judge giving the executor the power to act on behalf of the estate.
Estate taxes – there are federal estate taxes and New Jersey estate taxes. The taxes are assessed on your estate based on the size of your estate when you die. In 2009, you can die (in most cases) without paying any federal estate tax if your estate is $3.5 million or smaller. In New Jersey, the state estate tax is assessed if your estate is greater than $675,000.
Ancillary probate – a probate proceeding conducted in a state other than the one in which you lived and where you own property. For example, if you are a New Jersey resident and you have a vacation home in the Poconos, your primary probate will take place in New Jersey and your executor will need to start an ancillary probate in Pennsylvania to get the court order that allows the transfer of your vacation home according to the terms of your will.
There are other legal terms that your lawyer will reference. If you don’t know the meaning of any term of concept that she discusses, you should ask for an explanation. After all, it’s your estate plan and you want to be sure that it carries out your wishes.
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