Estate planning is defined as the process of preparing for the disposal of an estate’s assets during a person’s life.
Reminding your clients who have neglected to begin their estate planning that there is no need to worry because the government has created one for them is a statement that startles and awakens most everything. The questions to really ask your clients are, would you rather make these decisions on your own in a private manner, have a probate court judge interpret your wishes (through a will) or default to the government plan? Your clients assets will be distributed at your death, the only question is by whom.
There does not come a day when I meet with clients who has it all figured out. Let’s call one couple Mr. and Mrs. Smith. They are going to have their assets payable-on-death or transfer-on-death; maybe they have completed beneficiary designations for their annuities, life insurance and retirement plans. These clients would avoid probate, that is true. However, my question for them (and this should be the question you are asking), is always, what happens if you get sick? What happens if you require long-term care (LTC)?
Failure to incorporate long-term care costs into an estate plan can absolutely wreak havoc on what one has tried to accomplish. For example, let’s look at the Smiths. They are going to avoid probate. Assets will go to their beneficiaries in a timely, efficient, cost-effective manner. However, if either spouse requires long-term care and they spend all of these assets on their health care costs, they very well could have nothing left to avoid probate. Planning for long-term care costs should be a pillar of estate planning.
So what should we know about these issues, and what can we do to solve them?
1. The level of risk is high.
In 2010, the U.S. Department of Health and Human Services (HHS) conducted a study regarding long-term care in the United States. HHS found, to the surprise of many, that 70 percent of those above age 65 require at least some long-term care.
So, first and foremost, this affects the great majority of our clients.
We need to remind the boomers that this percentage is not reflective of their parents’ experience. Seventy percent of the greatest generation did not require LTC services. This number has skyrocketed recently because people are living longer. As life expectancies increase, the negative side effect is that more seniors require LTC services.
Most likely, it has become very difficult for many of your clients to live on one income, many cannot rely on their children to provide this care and an alarming percentage end up in a facility.
Image: AP photo/Bernd Kammerer.