What\'s Your Plan? Protecting Your Most Important Asset - Your Family
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Transcript of What\'s Your Plan? Protecting Your Most Important Asset - Your Family
Opus Advisory Group, LLC 2008
Peter D. Marengo, CLTC
WELCOME
Opus Advisory Group, LLC 2008
What’s Your Plan?
Protecting your most important asset: Your family
PRESENTED BY:
Peter D. Marengo, CLTC(914) 825-1010
Opus Advisory Group, LLC 2008
The agenda…
Why planning for long-term care must be discussed with your family
What the consequences are if you don’t
Developing a plan to protect your family and finances
What will pay for your plan
Opus Advisory Group, LLC 2008
My goals are to…
Give you insight into the consequences your needing care over a period of years could have, not on you, but those you care deeply about.
Speak to the consequences an illness will have on your best thought out retirement plan.
Discuss the options for protecting both your family and finances should you need care over a period of time.
Opus Advisory Group, LLC 2008
Living a long life could well be in your future.
Planning for it is now a necessity.
Opus Advisory Group, LLC 2008
I believe that reasonable people…
Understand they could live a long life.
Believe that it’s possible they could become frail and need care if they do live a long life.
Are willing to consider taking action if they understand that needing care could have serious consequences to their family and retirement portfolio.
Opus Advisory Group, LLC 2008
That said, I’ve had clients tell me…
Opus Advisory Group, LLC 2008
What if I don’t live a long life? Very few in my family made it past their 70’s.
Or…
Even if I do live a long life, what if I don’t need care? Everyone in my family was healthy until the day they died.
Opus Advisory Group, LLC 2008
You very well may be right…
The risk of you living a long life may be low because of your family history.
The risk of you needing care may also be low because of your family history.
Opus Advisory Group, LLC 2008
But have your thought about the consequences to those you love if you ever did need care over a
period of years?
Opus Advisory Group, LLC 2008
Failure to develop a plan for care likely will create two sets of consequences…
To the emotional and physical wellbeing of your caregivers; and
To your retirement portfolio which was never intended to pay for care.
Opus Advisory Group, LLC 2008
Who do you think is most impacted by needing care
over a period of years?
Opus Advisory Group, LLC 2008
Ironically, it’s not you…
It’s your family.
The nature of long-term care demands your family’s attention because a cognitive impairment or an inability to perform the basics activities of daily living are all consuming.
And since that attention may not be shared by your children equally, it may very well tear the family apart.
Opus Advisory Group, LLC 2008
Not one of my clients has ever told me they wanted their children to put aside their lives to take care of them.
To which I’ve replied…
“Respectfully what choice will they have if you don’t have a plan?”
It’s Your Family!!!
Opus Advisory Group, LLC 2008
Put simply, if you ever need care over a period of years, your life is not going to end…
Someone else’s life is going to end.
It’s Your Family!!!
Opus Advisory Group, LLC 2008
Are you aware that your
life savings is not going
to pay for your care?
Opus Advisory Group, LLC 2008
Your retirement portfolio is going to pay for care.
Your portfolio is allocated to generate income to support lifestyle. Reallocating the income likely will have two serious consequences…
First, to your ability to keep your financial commitments; and
Second, if the illness lasts long enough, to the financial viability of your spouse and or children, who may be depending on an inheritance.
What will pay for your care?
Opus Advisory Group, LLC 2008
What is Important to you?
From this point, I ask that you not focus on your risk of needing care over a period of years…
But rather the consequences to those you love about if you ever did.
Opus Advisory Group, LLC 2008
What’s the plan?
Opus Advisory Group, LLC 2008
It’s twofold… To maintain your independence in the community
for as long as possible without risking the emotional and physical wellbeing of those who will provide your care.
To preserve your retirement plan so it can execute for the purposes you intended Supporting your lifestyle and keeping continuing
commitments to your family and community To make sure your surviving spouse (in any) never has
to turn to the children Leaving a legacy to those who deserve and/or need it
Opus Advisory Group, LLC 2008
Paying for your plan…
How paying for care can impact your retirement
portfolio
Opus Advisory Group, LLC 2008
During working years… You create and fund a portfolio that will both support a
lifestyle during retirement and keep continuing commitments to your family and community.
The portfolio is allocated precisely for that purpose. It’s not likely that there will be a lot of income left over.
Many believe that the implied promise is that principal will remain intact because you don’t know how long you and your spouse will live and what may happen.
Opus Advisory Group, LLC 2008
And during working years, that portfolio is protected by…
Opus Advisory Group, LLC 2008
Asset & Income Portfolio Protection Portfolio
Automobile ⇒
Family ⇒
Wealth ⇒
House ⇒
Salary ⇒
Auto insurance
Life & health insurance
More life insurance
Home owners insurance
Disability income
Opus Advisory Group, LLC 2008
What is protecting your retirement
portfolio, which includes your
wealth and home, from the risk of
needing care?
Opus Advisory Group, LLC 2008
Alan & Camille are 43 years old. They have 2 children… Their combined income is $200,000 per year.
The house is worth $850,000. It has a mortgage of $200,000.
Their retirement portfolio is just under $500,000.
One child is in private school, the other in college.
In addition they belong to a club, have modest credit card debt and purchase a car every 5 years.
Opus Advisory Group, LLC 2008
Alan dies suddenly
of a heart attack
Opus Advisory Group, LLC 2008
What has been allocated from the
retirement portfolio and/or equity in
the house to pay for the continuing
obligations that his wife will face?
Opus Advisory Group, LLC 2008
Nothing… Alan purchased life insurance.
Alan didn’t think he would die during working years. In fact, statistically he was correct.
He knew, however, that even though the risk might be low, the consequences would be catastrophic to his family.
Alan purchased life insurance for the same reason everyone purchases life insurance…
Opus Advisory Group, LLC 2008
He loved his family.
Opus Advisory Group, LLC 2008
Alan & Camille make it to 78… His passion is golf. Camille rides horses. Both love to
travel and they have a house in Florida.
Their house is paid off and worth $1,500,000. Their portfolio, worth $2,000,000, generates $100,000 per year. Combined with social security, it is $145,000 per year.
They have a child who has not made the best decisions and are helping to pay for their grandchildren’s education.
Opus Advisory Group, LLC 2008
Camille is diagnosed with
Alzheimer’s.
Opus Advisory Group, LLC 2008
What has been allocated from the
retirement portfolio and their income to
pay for her care over the next 8 to 10 years?
Opus Advisory Group, LLC 2008
All of it.
Where else can it come from?
Opus Advisory Group, LLC 2008
Alan is now faced with how to pay for his wife’s custodial care. He
looks into…
Opus Advisory Group, LLC 2008
Medicare but finds out that it is health insurance. Health insurance pays for skilled and or rehabilitative care only.
The VA is not an option for custodial care.
Medicaid. He is told it will pay for custodial care, but almost exclusively for care in a nursing home. Alan promises himself it is the last option. He is also learns of the tax consequences associated with gifting low cost-based assets and qualified funds.
Opus Advisory Group, LLC 2008
Since nothing was allocated to pay for care, Alan is now forced to reallocate the couple’s income to pay for it.
At a minimum, their lifestyle is devastated and he is forced to make difficult decisions on what to spend money on.
Alan is now faced with the possibility of invading principal.
His children are now faced with re-orientating their lives to help provide care.
Opus Advisory Group, LLC 2008
Camille has Alzheimer’s…
Opus Advisory Group, LLC 2008
Her husband and children
suffer from it.
Opus Advisory Group, LLC 2008
A thought…
Take a moment to estimate what your income is likely to be when you retire.
Now subtract your estimated expenses.
Is it fair to say that there is not much left?
Opus Advisory Group, LLC 2008
Finding the right solution
Looking at long-term care insurance as an essential tool which protects your family and
retirement portfolio.
Opus Advisory Group, LLC 2008
Many people believe it
protects them if they need
care over a period of years…
Opus Advisory Group, LLC 2008
It doesn’t
Opus Advisory Group, LLC 2008
Long-term care insurance doesn’t protect you, it protects your family… It provides income which can be used to pay for the
types of care your family will find the most time consuming, stressful, and perhaps, embarrassing.
By providing income, it allows your spouse to maintain her relationship with you as a spouse, supervising your care, not as a spouse providing it.
And allows your children to maintain their relationship with you as children, supervising your care, not children providing it.
Opus Advisory Group, LLC 2008
Many also believe it
protects assets.
Opus Advisory Group, LLC 2008
It doesn’t do that either.
Opus Advisory Group, LLC 2008
It protects your Retirement Portfolio… Your portfolio generates income to support your
lifestyle and the prior commitments to your family.
Since nothing has been allocated from the income portfolio to pay for care, it likely will force a reallocation.
At a minimum, lifestyle could be seriously compromised. In a worst case scenario, you may have to invade the investment portfolio, thereby placing a surviving spouse at risk financially.
Opus Advisory Group, LLC 2008
“I’ve been told I have enough
assets to pay for the cost of long-term care”
Opus Advisory Group, LLC 2008
From this point, I would like you to think about income paying for care,
not assets paying for care…
Opus Advisory Group, LLC 2008
$1,000,000 = $50,000
$1,500,000 = $75,000
$2,000,000 = $100,000
$2,500,000 = $125,000
Opus Advisory Group, LLC 2008
Take a sheet of paper Draw a line down the middle…
On the left write: “Estimated Income”
On the right: “Estimated Expenses”
Your income is $125,000.
What do you think you expenses are?
Opus Advisory Group, LLC 2008
Where is the income going tocome from to pay for care?
Opus Advisory Group, LLC 2008
One more thought about wealth…
If someone has $10,000,000 in assets…
How much of that is liquid? Perhaps $3,000,000?
$3,000,000 generates about $150,000 per year.
Liquidating other assets may produce substantial income or capital gains taxes.
Opus Advisory Group, LLC 2008
“Maybe, but I’ve been told that if I
need care I won’t have much of a
lifestyle, so the money saved can be
used to pay for care.”
Opus Advisory Group, LLC 2008
It stopped being your
lifestyle, the day you got
married and had children.
Opus Advisory Group, LLC 2008
Some final thoughts…
Opus Advisory Group, LLC 2008
Successful people who love someone, purchase life insurance to mitigate the consequences of an unexpected death during working years…
Not because they expect to die during working years.
Successful people who love someone purchase long-term care insurance to mitigate the consequences of both providing care the impact paying for it…
Not because they plan on needing care.