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How to Protect your Family, Home and Retirement Savings from Critical Life Events

How to Protect your Family, Home and Retirement Savings from Critical Life Events. Legacy Care Planning David Yates, Presenter 915-309-8032 david@legacycareplanning.com.

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How to Protect your Family, Home and Retirement Savings from Critical Life Events

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  1. How to Protect your Family, Home and Retirement Savings from Critical Life Events Legacy Care Planning David Yates, Presenter 915-309-8032 david@legacycareplanning.com Legacy Care Planning

  2. All workshop participants willReceive a Free POA Booklet, Financial Exploitation handbook and Guide to Living Benefits – simply provide your Name and Email at the sign in Desk Legacy Care Planning David Yates 915-309-8032 David@LegacyCarePlanning.com Legacy Care Planning

  3. 40 Million Americans 65 and older • 75% will require Long Term Care in their lifetime • 50% will need care for at least 1 year • 20% will need care beyond 5 years • Average cost for care is $6,200 per month in a nursing home • 93% of aging population have not purchased long term care insurance Baby Boomer GenerationChallenges of Aging Legacy Care Planning

  4. Baby Boomer Generation Critical Life Events 40% Chance of Needing Chronic Care if 65 or older Heart Disease and Stroke related incident every 29 seconds 50% of seniors under care have Alzheimer's or Dementia Every 30 seconds a New Cancer is Diagnosed Young People not immune – susceptible to lifestyle risks Legacy Care Planning

  5. Baby Boomer Generation Impact of a Critical Life Event The financial impact of a critical life event can be devastating to an individual or family and is the leading cause of Bankruptcy in the United States. Most individuals do not own Long Term Care Insurance or have critical or catastrophic care coverage. Long Term Care Policies are becoming more difficult to obtain and are not affordable for most families. Legacy Care Planning

  6. Consumer Financial Concerns Legacy Care Planning

  7. Estate Planning Tools Die too Soon – Death Benefit, Savings, Permanent Financial Investments, Mortgage Insurance, Final Expense Trust, Estate Protection Plan and Legal Documents Critical Illness -- Medical Insurance, Disability, Catastrophic and Chronic Care, Final Expense Trust, Savings Accelerated or Living Benefits from Permanent Financial Investments, Estate Protection Plan and Legal Documents Live Too Long– Long Term Care, Savings, Accelerated Benefits from Permanent Financial Investments, Final Expense Trust, Estate Protection Plan and Legal Documents Legacy Care Planning

  8. Living Benefits for Critical Life Events Living Benefits are Accelerated Benefits paid from Life Insurance Policies to the Insured while still Living A monthly Accelerated benefit can be paid in the event of Disability, Home care , Chronic or Long Term care in a facility A lump sum can be paid for critical care, major Illness, alternative treatments and terminal diagnosis Benefits are Tax Free in most Circumstances Legacy Care Planning

  9. Living Benefits for Critical Life Events Terminal or Critical: Accelerated Benefit could be a $400,000 lump sum based on a factored discount death benefit of $500,000 Terminal, Critical or Major Illness: Could elect a partial benefit of 50% Accelerated Benefit of the death benefit – the discounted benefit lump sum could be $200,000 – with a remaining $250,000 death benefit Chronic, Critical or Long Term care: Could elect a full or partial accelerated benefit of up to 2% a month of the discounted death benefit. The remaining death benefit is intact. The ABR must be elected annually (All examples are hypothetical and are subject to individual illustrations and underwriting) Legacy Care Planning

  10. Comprehensive Wealth Protection -- Permanent Financial Products that offer access or accelerated benefits for Critical Life Events -- Maximizing existing 403b, 401, TSP, IRA and other Tax Deferred Savings Programs (The Retirement Income Gap) -- Understanding the scope and nature of current benefits being offered by the employer and EOI -- Building the Legal Structure and Mechanismsto protect the wealth of the estate while living and for your heirs Legacy Care Planning

  11. $88,826* Income needed in 20 years $56,000 Net Loss of Spendable income $20,895 Retirement Income Retirement Income GapCan You Live on a Fraction of your Final Salary? Begin Working Retire at 60 *Assumes a 3% inflation factor Source: TRS Handbook Legacy Care Planning

  12. The 20 Year Mega Trend Wealth and Inheritance John Naisbitt in his book Mega Trends addressed the issue of wealth transfer beginning with the year 2010 through 2030. More Wealth will be transferred in that twenty year period than was created the entire 200 years prior. Careful on that one – the Baby Boomer Generation is Spending $$$ In fact, some Heirs never receive an Inheritance due to the cost of care, increased life expectancy, failure to legally protect assets and debt left behind. Legacy Care Planning

  13. Prepare Love Ones for Inheritance Preserving the Legacy Don’t Spring Unexpected Inheritance on Your Children, Loved Ones or Beneficiaries Sudden wealth can have a “Meteor Effect” causing Unintended Consequences Consider working with a Financial and Legal Professional to Preserve a Legacy for Your Heirs Legacy Care Planning

  14. Parenting Your Parents Communicate with your parents early and often. Find out what they want, don't want and can afford. Remember, there are no meaningful conversations on a respirator. Jim Comer – Author of “Parenting Your Parents” Legacy Care Planning

  15. Parenting Your Parents When a Parent is asked Who will handle their care the Typical response is “My Children” Research Long Term and Chronic Care Programs – Medicare, Medicaid and Care Benefits for Veterans – With Proper Planning it is Possible to Qualify Even if There is Too Much Money Understand Your Role is Changing-- Seek the Help Of an Attorney – Legal Powers will be Required To Handle Their Affairs, Preserve Assets and Deal with Issues Related to Aging Legacy Care Planning

  16. Parenting Your Parents Aging in Place The Majority of Seniors prefer to live at Home – only 22% Of those over 85 move outside of the Family Home for Care Aging in Place is the ability to adapt one’s own residence so that Living at Home is Safe and Functional Activities of Daily Living (ADL) is the Ability or Inability to perform The Daily Activities of Self Care The Number One concern the Elderly have while living at home is Falling About 30% of seniors end up becoming seriously injured from accidents While living at Home – many never Fully Recover and become Immobile Legacy Care Planning

  17. Parenting Your Parents Caution! Be Aware of the Issues Related to Aging, Depression and Loneliness Become unable to Manage Financial matters or inadvertently lose track Of Vital Financial Documents and Personal Papers Be victims of Financial Exploitation and Scams or Elder Abuse Receiving care from a person with substance abuse, gambling or financial problems, or mental health issues Be dependent on a family member, caregiver or another person who may pressure them for money or control of their finances Activities of Daily Living(ADL) can become suddenly challenging or dangerous Legacy Care Planning

  18. Parenting Your Parents Preparing for the Inevitable 100,000,000 Million Americans will face an Incapacitating Illness and Rely on Someone else to carry out their Health Care wishes 50% do not have Wills in place – updated or Compliant Legal Powers $42 Billion in “Unclaimed Income” is currently being held by the States Family members may have difficulty locating Vital Documents or Financial Statements at the time of need or during a Health Crisis The average cost for a Traditional Burial is $11,500 Yet 60% of Americans will rely on someone else to make Final Arrangements and front payment for Final Expenses Legacy Care Planning

  19. Parenting Your Parents Planning Awareness Attempt to Build Consensus with other Family Members -- especially when Dealing with Crisis Life Events and Estate Issues Understand the Importance of Legal Advice and “Enhanced Powers” when assuming responsibility for another’s care Avoid any appearance of “Self Dealing” and be thoroughly Informed On the Requirements of POA and Fiduciary Responsibilities Work with Legal and Financial Planning Professionals to Document any Strategies required to “Reposition” or Transfer Assets when Planning to obtain Eligibility for Medicaid or VA Benefits Legacy Care Planning

  20. Parenting Your Parents Final Arrangements Determine the Budget and Planning Preferences of Final Arrangements in Advance – there are Over 49 different items to consider when Planning Consider Funding a Final Expense Trust for Final Arrangements – Liquid within 24 to 48 hours excess funds go back to Family FET Funds are protected from Creditors and are not Considered a “Countable Asset” for VA and Medicaid qualification purposes FET Policies are very simple to Establish and do not require a Funeral Home to be Designated or Visited in Advance Legacy Care Planning

  21. Parenting Your Parents Care Options and Resources Medicare and Supplemental Polices Long Term and Chronic Care Insurance, Living Benefits Reverse Mortgage, Sell Family Home or Property Home Care agency, Community Housing, Assisted Living or Nursing Home, Alzheimer Unit Parent and Child Living Together Private Pay, Savings, Retirement Income, Annuities Medicaid and VA Care Benefits and Facilities Legacy Care Planning

  22. Medicare Covers Short Term Care • Care typically follows a hospital stay of at least 3 days – designed to cover rehab after a stroke or joint replacement surgery. Must go to facility in an ambulance • Days 1-20 – 100% paid by US Government • Days 21-100 – patient pays on average $148/day (Medicare supplemental insurance typically will cover this co-pay) • Be Aware: Terminology could cost You thousands of dollars – such as “In Patient” versus “Under Observation” What Medicare Covers Legacy Care Planning

  23. What MedicaidCovers Primary Payer for Long Term Institutional Care All Medically Necessary Care, Prescriptions, Room and Board, Health, Insurance Premiums, Physical Therapy Medicaid is not a “Free Ride” or Government Welfare Program – it is Jointly Funded at the Federal Level and Administered at the State Level Legacy Care Planning

  24. Will you or a loved one receive quality care if Medicaid Benefits are used versus self-pay? • Will you or a loved one be able to get into the nursing home of your choice if Medicaid is in the picture? • Will you or a loved one have to spend down your assets or go broke before being eligible for Medicaid Benefits? Most Common Questions aboutan Elder Receiving Medicaid Benefits Legacy Care Planning

  25. Medicare: very restrictive and heavily regulated. Care must be prescribed by a physician and billing should be handled by a Medicare Certified organization • LTC or Living Benefit Policies: requires Evidence of Insurability(EOI) and considered unaffordable for most Seniors over the age of 70 • Self-Pay: most families would struggle to pay the Cost of Care out of pocket – monthly charges are typically in the $3500 to $7500 range • Medicaid and VA: Medicaid is the predominant payer source for all Nursing Home costs. Estates with Assets up to $1 million or over can typically legally shelter Assets and still qualify for 100% benefits. 4 Ways To Payfor Long Term Care Legacy Care Planning

  26. Sickness • Age • Citizenship • Residence • Income • Assets • Compliance Medicaid Eligibility: If you pass all 7 tests listed above and you agree to chip in your monthly income, then Medicaid will pay your nursing home expenses. 7 Steps To Medicaid Eligibility Legacy Care Planning

  27. What Medicaid Pays For Legacy Care Planning

  28. Sickness: a doctor must confirm you are sick enough to need nursing home care • Age: must be at least 65, legally blind or disabled by Social Security standards • Citizenship: you must be a U.S. citizen • Residence: you must be a resident of the state in which you are applying • Income varies from state to state • Assets:typically $2000 or less How To Measure Eligibility Legacy Care Planning

  29. Income: 2014 limit ($2163 single $4326 couple/month) If your income is ABOVE the maximum monthly limit: YOU FAIL! Maximum Allowable Monthly Income Secret Strategy #1: Legal Mechanism to Qualify If your income is BELOW the maximum monthly limit: YOU PASS! How To Measure EligibilityUsing The “Income Test” Legacy Care Planning

  30. Countable Assets: Must Be Less Than $2,000 Countable Assets Exempt Assets Everything! Clothing Furniture Jewelry Over $200,000 Considerations To Consider Passing The “Asset Test” Secret Strategy #2: “Convert Countable Assets to Medicaid and VA COMPLIANT Accounts or Legal Mechanism” Legacy Care Planning

  31. You can legally shelter assets if you know the rules and play by them Secret Strategy #3: “Gifting” You Qualify! Within the Look Back Period? Any Penalty Due? Passing The Final Test:“Compliance” Your Assets Legacy Care Planning

  32. John & Mary Smith: age 75 and 73 • Residence worth $165,000 • Total Countable Resources: $200,000 • Monthly Income: John: $1,600 Mary: $900 • Mary is currently in Nursing Home • Nursing Home Cost: $5,500 • Health Insurance: $200 Case Study 1:Crisis Case for Couple Legacy Care Planning

  33. Problem: • Unreimbursed medical expenses of $5,700 • Monthly living expenses of $1,050 • Total monthly expenses of $6,750 minus monthly income of $2,500 leaves a shortfall of $4,250 • Home is still titled in both spouses names Case Study 1:Crisis Case for Couple Legacy Care Planning

  34. Solution: • Reduce assets from $200,000 to $88,440 using the Community Spousal Resource Allowance (“CSRA”) • Capture $150 of Mary’s monthly income for John • Pre-Pay burial/funeral cost for John & Mary ($20K) • Improve house for John ($15,000) • Buy new car for John ($15,000) • Gift Balance of $38,440 to 2 trusts: $23,588 keeper $14,851 give back • Title house to John (Special Deed to Children to protect the home from Medicaid Estate Recovery Program) Case Study 1: Marital Crisis Case Legacy Care Planning

  35. The Results: • Mrs. Smith is eligible for Medicaid in just 4 months versus spending down the $88,440 for nursing home care. This saves the estate $236,630 • Mr. Smith increased his monthly income from $1,600 to $1,750 • In just 5 years, the gifting trust fund grew from $23,588 to $28,015 (assuming a 3.5% rate of return) • House is protected from recovery when Mrs. Smith dies Case Study 1:Marital Crisis Case Legacy Care Planning

  36. Sue Roberts: age 75 • Total Countable Resources: $213,000 • Residence value at 175,000 • Monthly Income: $2,190 • Sue is currently in Nursing Home • Nursing Home Cost: $5,500 • Health Insurance: $200 • Miscellaneous: $100 Case Study 2: Single Crisis Case Legacy Care Planning

  37. Problem: • Unreimbursed medical expenses of $5,700 • Monthly living expenses of $1,500 • Total monthly expenses of $7,200 minus monthly income of $2,090 leaves a shortfall of $5,110 Case Study 2: Single Crisis Case Legacy Care Planning

  38. Solution: • Reduce countable asset from $213,000 to $203,000 by pre-paying for burial/funeral cost for Sue ($10K) • Further reduce countable assets from $203,000 to $86,500 using gifting trust • Immediately convert the $86,500 from an asset to a monthly income for 23.3 months • Retitle the house to the children to preserve the value Case Study 2: Single Crisis Case Legacy Care Planning

  39. The Results: • Ms. Roberts is eligible for Medicaid in just 23 months versus spending down the $213,000 for nursing home care. This saves the estate $301,500 (Estate plus the entire value of the home) • $10,000 is protected from spend down by pre-paying for funeral/burial • The combination of social security and annuity income will cover all nursing home expenses for 23 months and then Medicaid benefits begin Case Study 2: Single Crisis Case Legacy Care Planning

  40. Professional Planning Not Required! On August 31, 2000, Henry sold his house & transferred $250,000 to his sons. In December, 2001, Henry was placed in a nursing home. On July 10, 2003, the family helped Henry apply for Medicaid because his savings were gone and he could no longer pay. The Medicaid Case Officer reviewed the information submitted and determined that Henry would be ineligible for benefits until July 2005. The family will have to come up with a way to pay for another 30 months. Legacy Care Planning

  41. Professional Planning Not Required! If Henry’s care would have been paid out of pocket for just 1 month, the $250,000 gift would not have taken place within the 3-year look back period and Henry would have been eligible for Medicaid coverage. Legacy Care Planning

  42. Lesson - If Henry’s family spent the cost of one month’s nursing home care for legal advice & assistance. . . Henry would have qualified in one more month, saving the family over $120,000. Would saving $120,000 be worth the Cost of Proper Planning? Legacy Care Planning

  43. So Do You Have To Be Poor or Go Broke To Qualify? Not at ALL! With Proper Planning it is Possible to Qualify for VA and Medicaid Benefits Even If You have too much Money! Legacy Care Planning

  44. “Aid & Attendance” is a tax-free, non-service connected disability pension awarded by the Department of Veterans Affairs to qualifying veterans or their surviving spouses. Unlike a service-connected pension, this pension must be used to pay for otherwise un-reimbursed* ongoing medical expenses – such as the “Cost of Care” at home or ALC *Expenses not reimbursed by other state/federal programs or private insurance VA Aid & Attendance Legacy Care Planning

  45. Monthly Annual • Married Veteran 2084 25,008 • Married Veterans 2676 32,112 • Single Veteran 1758 21,096 • Living Spouse 1381 16,572 • Surviving Spouse 1130 13,560 VA Aid & Attendance2014 Benefits Table Legacy Care Planning

  46. World War II December 7, 1941 through December 31, 1946 • Korean Conflict June 27, 1950 through January 31, 1955 • Vietnam Era August 5, 1964 through May 7, 1975; for veterans who served “in country” before August 5, 1964, February 28, 1961 through May 7, 1975 • Gulf War August 2, 1990 through a date to be set by law or Presidential Proclamation VA Aid & AttendancePeriod of War Beginning and Ending Dates Legacy Care Planning

  47. Overview: • Mr. and Mrs. Smith: age 81 and 80 • Total Countable Resources: $160,000 • Residence valued at $230,000 • Monthly Combined Income: $3,618.00 • Mr. and Mrs. Smith reside in their family home • Cost of Home Care: $3500.00 monthly for both • Combined Health Insurance: $435.00 Case Study 4: Veteran & Spouse Legacy Care Planning

  48. Problem: • NEGATIVE cash flow: ($2217.00) a month • Unreimbursed medical expenses of $3935.00 a month • Monthly living expenses of $1,900.00 per month • Total monthly expenses of $5835.00 per month Case Study 4:Veteran & Spouse Legacy Care Planning

  49. Solution: • VA Asset Target of $30,00 to Qualify • The $160,000 in countable assets must be reduced by $130,000 • Reduce spend down amount further by positioning $40,000 from the $130,000 into an irrevocable financial account making it an uncountable resource • Set up a gifting Trust for the remaining $90,000 to protect from a forced spend down • Seek Legal Advice to Transfer Title of Home and Assets Case Study 4:Veteran & Spouse Legacy Care Planning

  50. The Results: • Mr. and Mrs. Smith qualify to receive an Aid & Attendance benefit of $2676 a month • Can afford to stay at Home while receiving Care • In just 5 years, the gifting trust fund grew from $90,000 to $106,892 (assuming a 3.5% rate of return) • Entire home value is protected from MERP Case Study 4: Veteran & Spouse Legacy Care Planning

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