Understanding Long-Term Care Planning
“Unless you're very rich or very poor, you should be looking into all of the long-term care possibilities out there. Because of the costs and complexity involved, the choice isn't easy. But it is necessary.”
There is no easy way to plan for long-term-care expenses. According to the U.S. Department of Health and Human Services, 70% of those age 65 and over will need some sort of long-term care. Paying out of pocket won’t be possible for most, because the national median annual cost of a private nursing room is $97,455. In New Jersey that amount is closer to $156,000. annually
Kiplinger notes, in its article, “The Impossible Reality of Long-Term Care Planning,” that the long-term care insurance industry is in flux, with many companies closing this part of their business because claims are much higher than expected.
While there’s no perfect, easy solution, you can consider long-term care insurance. The other options are to be very wealthy and pay out of pocket, or try to qualify for Medicaid.
Most of us have a financial situation that could be ruined by the average long-term care event. The best bet is to transfer some of the risk to an insurance company. The issue then becomes determining the right amount. Many insurance agents recommend a monthly benefit that is aligned with the average facility cost. But given the high cost of long-term care insurance, it should be used to fill a gap, not cover the entire expense. Don’t reach to buy a policy you can barely afford today, because premiums can skyrocket.
As far as the type of policy, traditional long-term care insurance is the easiest to understand and the type everyone bought until a few years ago. While you’re covering a big risk from both a likelihood of need and a dollar perspective, it’s expensive.
The life insurance industry recently introduced a hybrid universal life insurance with long-term care riders. This is permanent universal insurance with flexible premiums. “Riders” are like guarantees. In effect, these are policies with set periods for the premium. You can pay for them all up-front or over time. Premiums are guaranteed not to rise, and if you don’t use the insurance, it will pass to the next generation as a death benefit. However, the death benefits are lower than they would be without the long-term care part, and the monthly benefit amounts are typically lower than they would be for the same amount in a traditional policy. Some will take this tradeoff for the certainty of knowing the amount of their premiums.
This insurance isn’t easy to get: there’s a standard life insurance exam plus a memory test. If you have health or cognitive issues, an annuity with a long-term-care rider may be the only option.
Reference: Kiplinger (January 2, 2018) “The Impossible Reality of Long-Term Care Planning”
Late NFLer Aaron Hernandez Created Trust Before Suicide
“Deceased NFL player Aaron Hernandez reportedly set up an irrevocable trust as a means of keeping money from creditors.”
Former NFL tight end Aaron Hernandez created a trust before his prison suicide in early 2017. This trust may have been designed to provide money for his young daughter, that couldn’t be accessed by creditors. Yahoo reported in its recent article, “Report: Aaron Hernandez may have hidden money in trust before his death,” that according to court documents filed in the Bristol County (Mass.) Probate and Family Court by the attorney for Hernandez’s estate, there’s a “AJH Irrevocable Trust.” Irrevocable trusts aim to shield their beneficiaries from claims by creditors and others, because the trust relinquishes ownership and control of the trust assets.
Many say that Hernandez’s estate didn’t leave much, if anything, for his five-year-old daughter when the New England Patriots released him in 2013. He was released on the day he was arrested for murdering Odin Lloyd. New England paid him more than $9 million of the $40 million contract he’d signed a year earlier. John Dugan, the attorney who represents the Hernandez estate, said the estate “will probably be insolvent.” Hernandez had debts of $2.82 million listed, while declaring only $1.2 million in assets. The Boston law firm that helped Hernandez create the trust, was ordered by a judge to turn over confidential documents and related materials to Dugan.
Another attorney, a trustee of the trust, declined to tell the media when the trust was created, whether Hernandez was named as a trustee and how much it’s worth. However, he did confirm that any assets protected are “not part of the probate estate,” which is the target of legal bills, tax liens and three wrongful death suits. Although the terms of an irrevocable trust are virtually set in stone once it’s signed, a probate judge can undo the trust under Massachusetts’ fraudulent conveyance law, if the creator of the trust was experiencing credit problems, trying to hide assets and naming someone else as a trustee.
Reference: Yahoo (November 28, 2017) “Report: Aaron Hernandez may have hidden money in trust before his death”
Florida Outdoorsman’s Will Contested
“Carl Bergstresser signed a will in which he stated that his 11.6-acre property on the Braden River should be forever maintained as a nature preserve.”
Right before he died of pancreatic cancer in July 2016, Carl Bergstresser signed a will in which he stated that his 11.6-acre property on the Braden (Florida) River should be forever maintained as a nature preserve.
The Sarasota Herald-Tribune reported in its recent article, “Outdoorsman’s siblings contest how trustees managed his estate,” that Bradley Magee, the attorney who drafted the will, said the Osprey-based Conservation Foundation of the Gulf Coast assumed ownership of the land. However, Bergstresser’s dying wish remains the subject of a prolonged legal battle. This question is further complicated by the uncertain outcome of an effort by Manatee County to acquire adjoining land from a developer to create an even larger nature preserve.
Bergstresser’s siblings, Diana and Phil Bergstresser, brought a probate court case that questions how the executors of their brother’s estate managed the assets which he left in addition to his homestead. They claim they’ve been deprived of most of the assets that would’ve remained in the estate, other than the donated land. Aside from his home and land, Carl’s estate is valued at $314,516.
Dated July 16, 2016, Bergstresser’s will states: “My homestead and all acreage owned adjacent to my homestead shall be donated or otherwise transferred to a nonprofit organization or government entity that will maintain such property for wildlife conservation and general conservation purposes on a perpetual or long-term basis.”
Bergstresser permitted his “personal representatives” named in his will—Magee, Phillip St. John, and Donald “Troy” Smith—to choose the nonprofit that would receive his property. The trustees paid a $32,000 mortgage and a $59,000 line of credit that Bergstresser owed from his remaining estate. The siblings say the will doesn’t state that Bergstresser wanted the debt paid out of the money that otherwise would have gone to his heirs and that his executors made the payments “without getting a court order.”
Their lawyer also claims the executors took $46,000 from the estate for their “personal representatives’ fees” and about $66,000 for attorney fees—an amount of attorney fees paid by the estate that they feel is “excessive.” He also said the court ordered the foundation to return $47,000 to the estate that the trustees paid it as a “stewardship fee” for costs from the closing on the property and putting it in a conservation easement.
Another unknown is an effort to get Manatee County to acquire 32.38 adjoining acres for which a developer received approval for a subdivision. When initially proposed, residents in the neighboring area strongly objected. They argued that the heavily wooded site on the Braden River is an oasis for an abundance of wildlife. They asked the county to acquire it for a nature preserve.
The developer granted the Conservation Foundation an option to buy that land for $3 million, and the foundation is willing to transfer that option to the County.
Bergstresser, whose property was directly west of the proposed suburb, joined the opposition movement. When he found out he was terminally ill, he decided his land should be part of that proposed nature preserve. Now that it has the Bergstresser land, the foundation is to classify it as a “conservation easement”, so it can’t be developed.
Reference: (Sarasota) Herald-Tribune (December 15, 2017) “Outdoorsman’s siblings contest how trustees managed his estate”