How Much Money Is Needed for Long-Term Care?

long term care
Planning for long-term care expenses now can save you and your loved ones a lot of stress later on.

You probably know that health care is a big expense for retirees. Research shows that 70% of seniors aged 65+ will require some type of long-term care in their lifetime. This could be as little as a couple of visits a week from a home health aide to years in a nursing home. If you don’t plan ahead, these expenses could easily  bankrupt you.

Motley Fool’s January 2020 article (which is still relevant a year later!) entitled “The Shocking Cost of Long-Term Care — and How to Tackle It” says that another thing you probably know — or should know —is that YOU’RE footing the bill for long-term care. It’s not covered by Medicare. Medicare will only pay for medical-related services, like those needed to help you recover from an injury, illness, or procedure. Therefore, if you’re admitted to the hospital and then need a few weeks at a skilled nursing facility to finish your recuperation, Medicare will usually pay for that short stay. However, if you need help getting dressed in the morning due to chronic conditions or merely your advancing years, are bedridden, or will need to move permanently into a nursing home, it’s not covered. You’ll have to pay for that care yourself.

Let’s look at the average annual cost nationwide of what some common services will cost you, based on 2019 data from Genworth:

  • Assisted living facility: $48,612
  • Home health aide: $52,624
  • Shared nursing home room: $90,155
  • Private nursing home room: $102,200

Remember that these are just averages, and in some parts of the country, you’ll pay much more. You can, therefore, see why it’s critical to have a plan in place for covering long-term care costs in your senior years, before that expense hits you.

You have a few choices for addressing the major expense of long-term care. One is that you can add to your retirement savings as much as possible. IRA contribution limits for 2021 max out at $6,000 a year for workers under 50, and $7,000 a year for those 50 and over. With a 401(k), you get even more flexibility to fund your savings. Workers under 50 can deposit up to $19,500 annually, and if you’re 50 and over, you can go up to $26,000. The more money you add to your savings while you’re working, the more funds you’ll have available in case you need to pay for long-term care when you retire.

Another option is to contribute to a health savings account, or HSA, and carry unused funds into retirement. You can then take withdrawals to pay for long-term care. Annual HSA contributions for 2021 max out at $3,600 a year for those who save on their own behalf, or $7,200 for those saving on behalf of a family. Workers 55 and older get an additional $1,000 per year to contribute. HSA funds never expire, so these accounts are a very effective way to save for future healthcare costs, like long-term care, in a tax-efficient manner.

Finally, you can buy a long-term care insurance policy which will pay for a big part of your costs when you have large bills. Very few insurance companies offer pure long-term care insurance any more – and even fewer people want to pay those premiums. Most people today are opting for life insurance or annuities with long-term care riders. Optimally, you should apply for long-term care insurance in your 50s, but many seniors get approved in their 60s. You can use funds from your HSA to pay for them.

Long-term care is an expense many seniors will have to address. If you want to avoid a situation where you’re forced into severe financial times, talk with your financial advisor today. Plan now to give you, and the people who care about you the most, less to worry about in the future.

Financial Infidelity that Appears after One Spouse Dies

Financial infidelity
Financial infidelity – when one spouse is making significant financial moves without the knowledge of the other.

When one member of a couple handles all the finances and dies, the surviving spouse is often left with a serious problem. Locating investment accounts, passwords to online accounts and other important information becomes an overwhelming issue, according to the article “Why smart people don’t recognize financial infidelity” from The Mercury. It’s a relatively new term, but not a new dilemma.

Take the case of a recently widowed or divorced person who has met a new person who appears to be the new love of their lives. The person is kind to them, supportive, and well, perfect. It’s hard to believe that such a seemingly wonderful person could have a dark side. However, whenever a new friend, hobby, or investment idea starts having a major impact on the person’s financial life, or if they have simply been careless with their financial affairs, the impact can become catastrophic.

People who are not confident in their ability to manage money or investments often hand off that responsibility willingly to their partner. If in a prior life, your spouse managed all of the household money and you did not learn how to handle the tasks that are required to run a home or manage an investment portfolio (or work with advisors), you might be a little too willing to pass that job on to a new partner.

You may fall into the traditional role of one person being responsible for the outside bills and investments and the other handling all of the household tasks.

Financial infidelity also includes things like having accounts that are not known to the other spouse or taking out credit cards without the other person’s knowledge. The same goes for one spouse suddenly putting a lifetime of savings into a single investment, or someone who knows little about markets spending a great deal of time day trading with the family’s savings. Gambling or excessive spending can also be financial infidelity.

What can you do? Here are a few tips.

Don’t give up control of finances. It’s not uncommon for people to combine finances when they are first married. However, if you’re heading into a second marriage, you may want to keep your money separate at first. Not paying attention to what’s going on with your money at any stage of life can lead to problems.

Educate yourself about money. If one of you is better at money management, that’s fine—but the one who isn’t needs to get up to speed. There are classes in personal finance at the local high school or college, so cost should not be an issue.

Speak up. If one person is made to feel like they can’t talk with their partner about money, there’s a problem. There may be accusations of trust—but trust is not granted automatically. Trust is built between a couple through experience. Financial transparency between partners is a sign of respect.

Read and understand documents before you sign anything. If you have questions, don’t sign anything until you have a full understanding. You should not be pressured into making decisions or commitments until you’re completely comfortable with all of the information. If you don’t get a satisfactory answer, don’t sign.

Part of your protection from financial infidelity is an estate plan. Speak with an estate planning attorney about creating a plan to protect your assets after you pass and while you are living. An estate plan needs to include – at a minimum – a Will, a Durable Power of Attorney, Designation of Health Care Surrogate, and may include Trusts, Living Wills, and other documents, depending upon your situation.

Reference: The Mercury (Jan. 29, 2020) “Why smart people don’t recognize financial infidelity”

Other articles you may find interesting: 

Special People, Special Trusts: SNT FAQs

Power of Attorney vs. Guardianship

***Want to learn more about how to protect your family from the government, lawsuits, accidental disinheritance, or nursing homes? Click THIS LINK to book a seat at one of our upcoming fun and educational workshops.***

Tax Implications of a Medicaid Personal Service Contract

personal services contract income is taxable
The money you received from that personal services contract you signed has to be reported to the IRS.

Personal services contracts are very popular in long-term care planning – especially when Medicaid benefits are sought. But they may not be the best solution.

Long-term care in a nursing home (also called a rehabilitation center) is expensive. Many people who are receiving or will be receiving long-term care have little in savings and face impending impoverishment. Medicaid rules allow certain planning measures that may preserve some of the applicant’s assets for his or her family.

One of these measures is known as a personal service or lifetime care contract. This legal contract specifies the compensation a family member will receive in return for providing lifetime personal care and oversight of professional care for the nursing home resident. The Medicaid rules and the family situation will dictate how much compensation can be paid.

In most states, the caretaker is paid in installments as the care is provided. But, in Florida, the caretaker can receive the compensation as a lump sum payment. The caretaker receives the compensation up front, but is legally obligated to provide care for as long as the nursing home resident is alive.

This lump sum payment is considered compensation by the IRS and is taxable income to the caretaker when received.

I’m going to repeat that because it’s so important:

This lump sum payment is considered compensation by the IRS and is taxable income to the caretaker when received.

The Internal Revenue Code § 61 defines gross income as “…all income from whatever source derived, including (but not limited to) the following items: (1) Compensation for services, including fees, commissions, fringe benefits, and similar items…”

Some people think that just because they don’t receive a 1099 or W-2 for certain income, they don’t have to report it on their tax return. Wrong! Just because the IRS may not be notified of the payment doesn’t mean it doesn’t have to be reported. All income – even illegal income – must be reported or you’re committing tax fraud.

If you’ll be receiving compensation due to a personal service contract, be sure to talk to your tax professional before signing the contract because the tax consequences of receiving a lump sum payment may be more detrimental to you than it is beneficial to the potential Medicaid applicant. An Elder Law attorney may be able to provide your family with other alternatives.

Other articles you may find interesting:

Hearing Aids May Save Your Brain

How Joint Tenancy Creates Problem for Seniors

***Want to learn more about how to protect your family from the government, lawsuits, accidental disinheritance, or nursing homes? Click THIS LINK to book a seat at one of our upcoming fun and educational workshops.***

Have an IRA? The CARES Act of 2020 Impacts You

CARES Act of 2020
The CARES Act of 2020 will affect nearly everyone’s retirement and estate planning.

The CARES (Coronavirus Aid, Relief, and Economic Security) Act of 2020 was signed into law by the President on March 27th. Several provisions of the legislation impact IRA and employer-retirement plans.

This is just a high-level overview of just a few of these provisions; be sure to contact your financial advisor to see if changes need to be made to your retirement-plan strategy.

If you were expecting to take Required Minimum Distributions (RMDs) from IRAs or employer retirement plans in 2020, this year’s RMDs are now waived. This is a permanent waiver, not just a deferral. This waiver also applies to beneficiaries of inherited IRAs, Roth IRAs, and employer retirement plans.

Any remaining 2019 RMDs having a required beginning date of April 1, 2020 and not withdrawn by January 1, 2020 are also waived.

Already take a RMD you don’t need? You may be able to reverse it through what is known as an indirect rollover. Distributions taken from an IRA can be returned to the same IRA if 1) the money is returned within 60 days and 2) there must not have been an IRA-to-IRA or Roth IRA-to-Roth IRA transfer within the 12 months preceding the distribution. However, beneficiaries are not able to reverse an RMD from an inherited IRA or employer retirement plan.

If you need to withdraw money from your IRA and you’re under 59 1/2, Coronavirus-related distributions (CRDs) up to $100,000 from IRA or employer plans will be exempt from the 10% early withdrawal penalty that would normally apply. Individuals who meet the requirements for being affected by the coronavirus are eligible.

These CRDs would still be taxable to the account owner, but you can pay the tax over a three-year period.

To avoid taxation, CRDs can be repaid to an eligible retirement plan or IRA and treated as having satisfied the 60-day rollover requirements if repaid during the three-year period beginning the day after the CRD was received.

The Treasury has extended the tax return filing date to July 15, 2020, from April 15, 2020, so the date for making 2019 IRA and Roth IRA contributions is also extended to the same date. Normally, IRA contributions for a prior year must be made by April 15th of the following year.

The extended contribution deadline also applies to 2019 Health Savings Account, Archer Medical Savings Account, and Coverdell Education Savings Account (ESA) contributions.

And finally, beginning with 2020 income tax returns, you’ll be able to take a $300 above-the-line charitable income tax deduction – even if you take the standard deduction.

Again, this is just a high-level view of some of the many provisions of the CARES Act. Be sure to contact your financial advisor and tax professional to find out how they may apply to your situation.

Other articles you may find interesting:

Can I Deduct Long-Term Care Expenses on My Tax Return?

How Does the IRS Know if I Gift My Grandchildren Money?

***Want to learn more about how to protect your family from the government, lawsuits, accidental disinheritance, or nursing homes? Click THIS LINK to book a seat at one of our upcoming fun and educational workshops.***

Should I Buy Mortgage Protection Life Insurance?

Mortgage protection life insurance
Mortgage protection life insurance may not be your best option.

Mortgage protection life insurance (MPI) offers are often disguised as official and formal requests from mortgage lenders, with convincing details, such as the lender’s and borrower’s names, the loan type, and the amount owed. In bold lettering, these documents lead with shocking headlines like:




Investopedia’s recent article entitled “Why You Don’t Need Mortgage Protection Life Insurance” explains that these declarations are then followed by scare tactic statements such as, “If you died tomorrow, would your family be able to continue paying the mortgage and maintain their quality of life?”

They then explain why their program will protect your family, after a death, by paying off the mortgage.

However, mortgage protection life insurance policies are generally not worthwhile. Here are several reasons why:

  • No flexibility: With regular term life insurance, beneficiaries may use insurance payouts as they see fit, but many MPIs send benefit payments directly to lenders and the beneficiaries never see any money.
  • Large premiums: Even if you’re a healthy person who has never smoked tobacco, MPI is usually more expensive than term life insurance.
  • No transparency: It’s hard to get a quote for MPI online—a major concern, since mortgage MPI prices can vary widely.
  • Fluctuating premiums: MPI premiums may only be fixed for the first five years, then they could spike.

There are some MPI policies that do offer policies with fixed premiums for the policy’s duration, but in many instances, the payout on these policies may decrease over time as potential payouts are lowered. This type of MPI life insurance—also called “decreasing term insurance”—is designed to pay off your mortgage balance, while each month your beneficiary pays down part of your mortgage principal.  The MPI policy’s potential payout, therefore, shrinks with every mortgage payment.

However, some newer MPI policies have a feature known as a “level death benefit.” These policies’ payouts don’t go down. Some MPI policies will also return your premiums, if you never file a claim after you pay off your mortgage. However, the returned premiums will probably be worth far less because of inflation. You will also have likely forfeited the opportunity to invest any money you would’ve saved, if you’d bought less expensive term life insurance.

An MPI policy may be a good idea for those who don’t qualify for term life insurance due to poor current health, because MPI is typically sold without underwriting.

Keep in mind that MPI is totally different from private mortgage insurance (PMI), which protects your lenders, not you. If you make a down payment of less than 20% on your home, you pay monthly premiums to a PMI policy that will pay your lender, in case you default. However, if you die, your heirs must keep making mortgage payments, and PMI only kicks in if family members default.

Reference: Investopedia  (June 25, 2019) “Why You Don’t Need Mortgage Protection Life Insurance”

Other articles you may find interesting: 

Beware of Recorded Deed Scam

What’s the Difference Between Whole Life and Universal Life Insurance?

Including Cryptocurrency in Your Estate Plan

Bitcoin app on phone
Cryptocurrency accounts rely on a sophisticated private key; someone you trust needs to have access to that key when you become incapacitated or die.

If you own any cryptocurrency, such as Bitcoin, you need to take some additional steps to make sure it can be accessed if you become incapacitated or die. This article explains that cryptocurrency is currently treated under probate law as an asset – like your house – and not as currency. Unlike a bank account or your house, there’s no physical record  – it’s all digital and can only be accessed via a computer. If someone doesn’t have your key (a sophisticated private passcode), your digital wallet cannot be accessed and the money is gone forever.

Be sure to mention your cryptocurrency in your Durable Power of Attorney, Will, or Revocable Living Trust. But don’t put your key in the documents – just provide instructions on where to find the document that describes in detail how to find and access your cryptocurrency.

Digital assets are a big part of our lives now, and should be included in everyone’s estate plan.


Other articles you may find interesting:

What Is Probate and How to Prepare for It

How Caregivers Can Prepare Before the Crisis

Beware of Recorded Deed Scam

Recorded deed scamMy husband and I recently executed a deed to transfer a piece of real estate to our revocable living trust, and today we received the notice you see in the photo. We had a good laugh – this wasn’t our first rodeo, so we knew it was a scam – but then I realized many people wouldn’t recognize it as a scam.

The letter looks pretty official – it has the correct names, property address, parcel identification number, and description of the property. Even though it states that they’re not associated with any governmental agency, people tend to overlook that. I get phone calls quite frequently from clients wondering whether they should send this company (or others like it) $95 for a copy of their deed and a copy of the Property Assessment Profile Report. I assure them they should NOT send anyone any money for those things.

First, if you signed your deed in a Florida attorney’s office, he or she should have mailed you the original signed deed after it was recorded (I do). So, you likely already have the original recorded deed somewhere in your papers.

Second, if you can’t find a copy of your deed, you can go online to the appropriate county’s Official Records (sometimes called Public Records) website, type in your name, find your deed (note: very old deeds may not be viewable online), and download or print an unofficial copy which shows when it was recorded. It’s free in most Florida counties. Here’s a link to Sarasota’s Official Records search.

If your deed is too old to be viewed online, or you actually need a certified copy of your recorded deed for some reason, then jot down the Book and Page number (usually in xxxx/xx format) or Instrument Number you found in the Official Records and contact your county clerk’s recording office to find out how to get a photocopy or a certified copy – generally for under $5.00.

Third, all the other information they want you to pay for is free on your Florida county’s Property Appraiser’s website. Here’s a link to Sarasota’s.

So, don’t be fooled by these scammers. Whenever you get something you’re not expecting, READ IT CAREFULLY. If you’re still not sure, and you’re one of my clients, call me. I’ll let you know if it’s legit or not.

Other articles you may find interesting:

Why are Seniors So Vulnerable to Scammers?

IRS Scams: What You Need to Know

What Should I Know About Reverse Mortgages?

reverse mortgages
With a reverse mortgage, there are no monthly payments of principal and interest. The interest is added to the loan and the debt is paid off when you leave the property, die, or sell.

Many people age 62 and older may consider talking to lenders about reverse mortgages.

The Dallas Morning News’ article, “The pros and cons of reverse mortgages,” explains that to get an FHA reverse mortgage—the most common type and what the government calls a Home Equity Conversion Mortgage (HECM)—at least one owner-occupant must be age 62 or older. The property must have enough equity to support the loan amount being sought.

With this type of mortgage, the required monthly cash payments, that is the payments for principal and interest, are zero. These payments are deferred. If you have $150,000 on an existing mortgage with $700 monthly payments for principal and interest, the cash cost will be zero if you refinance with a reverse mortgage.

But understand that you’re not getting “free” money. The interest you defer and don’t pay each month is being added to the debt. Therefore, if you begin the process with a $150,000 balance, you’ll owe more each month. Said another way, a reverse mortgage is a “negatively-amortizing” loan. The size of the debt increases over time.

The debt is paid off when you leave the property, die, or sell. Because an FHA reverse mortgage is an example of “non-recourse” financing, you and your estate can never owe more than the value of the home. Your other assets cannot be touched.

These mortgages, however, can be foreclosed like any other mortgage. This can be done if a borrower fails to pay property taxes and retain appropriate insurance coverage. The borrower must also pay condo association and homeowners association fees. Failing to make the required payments means the borrower is violating the contract.

A study by the California Reinvestment Coalition and Jacksonville Area Legal Aid found that there were more than 3,600 reverse mortgage foreclosures each month from April 2016 to December 2016.

However, HUD has developed some new safeguards to protect reverse mortgage borrowers from foreclosure. For more information on this type of financing, speak with an experienced mortgage broker, or discuss the pros and cons with an elder law attorney.

Reference: The Dallas Morning News (October 26, 2019) “The pros and cons of reverse mortgages”

Other articles you may find interesting:

VA Pays Millions in Home Loan Refunds

What Happens When Real Estate Is Inherited?


What’s the Difference Between Whole Life and Universal Life Insurance?

Life insurance
Life insurance is a great way to protect your family. Whole life and universal life offer some benefits term life doesn’t.

Whole life insurance helps with long-term goals, since it provides individuals with consistent premiums and guaranteed cash value accumulation. Universal life insurance gives consumers flexibility in premium payments, death benefits, and the savings component of their policy.

Investopedia’s article, Whole Life vs. Universal Life Insurance, explains that these two types of life insurance fall in the category of permanent life insurance. In contrast to term insurance, which guarantees a death benefit payout during a specified period, permanent policies provide lifetime coverage. If you want to cancel your permanent life policy, you’ll get the policy’s cash value. These policies are typically made up of two parts: a savings or investment part and an insurance part. Their premiums are higher than term policies, and insureds can also take out a loan by borrowing against the cash value. Thus, permanent life insurance is also called cash-value insurance.

Whole life insurance covers you as long as you’re alive. You must pay the same premium for a specific period to get the death benefit. This policy usually stays intact for the rest of your life, no matter how long you may live. This policy is good for long-term responsibilities, such as a surviving spouse’s income needs and post-death expenses.

One of its features is that it combines life insurance coverage with savings. Therefore, you may have to pay higher premiums at the start, when compared to a term insurance policy.

The insurance company deposits some of your money into a high-interest bank account. With every premium payment, your cash value increases. This savings part of your policy grows your cash value on a tax-deferred basis. You can receive the dividends in cash or allow them to accumulate with interest. You can also use your dividends to reduce your policy’s premiums or buy more coverage.

Universal life insurance is also called “adjustable life insurance,” because it has more flexibility compared to whole life insurance. You can decrease or increase your death benefit and pay your premiums at any time in any amount (with certain limits) after your first premium payment has been made. With this type of policy, you may be able to increase the face value of your insurance coverage. You can also decrease your coverage to a minimum amount, without surrendering your policy. Surrender charges may be applied against the cash value of your policy.

As far as the death benefit, there are two options: a fixed amount of death benefit or an increasing death benefit that is equal to the face value of your policy plus your cash value amount.

You also can change the amount and frequency of your premium payments. Therefore, you can increase your premiums or pay a lump sum, according to the specified limit in the policy. Some of your premium minus the cost of insurance is again deposited into an investment account, and any interest accrued is credited to your account. The interest grows on a tax-deferred basis, which increases your cash value. You can decrease or stop your premiums to use your cash value to pay premiums in a financial hardship. You can also partially withdraw funds with universal life insurance.

The downside of universal life insurance is the fluctuation of the return; if the policy does well, there could be growth in a savings fund. However, a bad performance means the estimated returns are not earned. Surrender charges may also be imposed when you terminate your policy or withdraw money from the account.

All in all, universal life insurance can be great protection for your family because of its security, flexibility, and variety of investment options.

Reference: Investopedia (April 18, 2019) Whole Life vs. Universal Life Insurance

Other articles you may find interesting: 

How Will The 2020 SECURE Act Affect You?

Roth IRA Tips and Tricks

Timeshares: The Inheritance No One Wants

timeshares vacations
Your heirs may not want the burden of  owning your vacation timeshare.

It seems like you can’t throw a rock in Florida without hitting someone who owns a timeshare, or who considered buying a timeshare. In general, the lucky ones are those who walked away from the sales pitch.

Don’t get me wrong – I’m sure there are millions of Floridians who actually use their week or two for getaways or family vacations. At least for a while. But, as an estate planning, elder law, and probate attorney, I frequently see families dealing with the downside of timeshare ownership. And as a financial professional, I can tell you they are NOT an investment – they’re an ongoing expense for an illiquid asset that will not appreciate, much like a swimming pool. People buy such things because they want them, not because they make any financial sense.

A timeshare is a form of fractional ownership in a property, typically in a resort or vacation destination. For example, if you purchase one week at a timeshare condominium each year, you own a 1/52 portion of that unit. Timeshares may be evidenced by a deed (you purchased an ownership interest in the property) or just a contract (you leased the right to use the property).

So, what are some of the downsides? Well, first of all, the fees never end. On top of the loan payment (if you financed your timeshare), there are annual fees, unexpected assessments, and miscellaneous fees to change weeks, trade locations, etc. And unlike a house, land, or even a car, you’ll never know what your timeshare is worth. While there are exceptions for the most desirable locations/weeks in places like Disney or highly desirable beach resorts, most “used” timeshares are NOT repurchased by the timeshare company, and end up being sold for next to nothing. In fact, sometimes it’s hard to even give them away!

Here’s a true story: Jack had a timeshare he no longer wanted. He gave it to a family member, Bill, as a gift. Bill used it for several years, but then had a financial setback and couldn’t afford the fees. He fell behind. He tried to sell it, but to no avail. So then he offered to give it back to Jack. Jack wanted no part of the timeshare and associated fees, and said “Thanks, but no thanks.” Then one day Jack received a recorded deed in the mail; Bill had quitclaimed the timeshare back to Jack! (In Florida, only the seller has to sign the deed). So, Jack then quitclaimed the timeshare back to Bill. I don’t know what happened after that – maybe they’re still tossing the hot potato back and forth.

Timeshares also cause problems at the owner’s death when:

  • The owner never transferred it into his living trust, thus triggering probate for an illiquid asset.
  • The owner became ill before death and stopped paying the annual fees or assessments, and at death she owes thousands of dollars to the timeshare company, for a property no one will buy.
  • The timeshare was properly transferred to a living trust, but no heirs want it and they can’t find a buyer.
  • The post-death transfer of the timeshare was done incorrectly, and eventually the timeshare company tells the heir that they can’t use the week until they re-probate the property and have the transfer done properly. Oh, but they still need to pay the fees and assessments!

Sometimes, abandonment is the only option children have when Mom and Dad leave them an unwanted timeshare, but it has to be done properly to prevent problems.

So, if you own a timeshare, find out whether anyone actually wants it when you die, AND whether they can afford to pay the fees and assessments year after year, even if they lose their job. If not, consider getting rid of it while you’re still alive. If you can.

Other articles you may find interesting:

Can I Protect My Daughter’s Inheritance from Her Loser Husband?

What Happens When Real Estate Is Inherited?