“Live long and prosper,” famous words from the famous Star Trek TV series spoken by Spock. Whether you are into Star Trek or not, these are words that every person wants to hear and live. And it isn’t that far from the truth these days…people are definitely living longer and there are many reasons why.
While this is a great idea and something we all want to achieve, it does mean there is more planning required. To live an extra 10 years can take a toll on someone’s finances and for many, they aren’t available. So how does one prepare for such an extended time in their life? There are things to consider today that can have a big impact on tomorrow and your ability to enjoy your later years.
Today’s adults are living longer. A non-smoking 65-year-old woman has a 50% chance of living until she’s 88—and her male counterpart could easily live to 85. It’s how life-expectancy works, according to the article in Kiplinger, “Are You Ready for Longevity? 4 Steps to Take Now,” The concept is the longer you live, the longer you are likely to live.
Given the happy news that you should expect to live a long time, what can you do to protect yourself and your family? Here are four steps you can take…
Step One…Create a long-term plan you and your loved ones. For a married couple, it’s likely that one of the two will end up in a nursing home. Plan for how you’ll manage to pay for that well in advance of needing it. If you can purchase a long-term care insurance policy while you are still healthy enough to qualify you won’t need to use up all the household’s money to pay for the care. Long-term care insurance usually pays for both skilled nursing home care and in-home health care aides.
Traditional long-term care policies can be expensive. However, insurance companies have created hybrid policies that combine long-term care benefits with life insurance. If you don’t use the long-term benefits, your loved ones receive the life insurance proceeds upon your death. That takes a way the worry that you will pay premiums and get nothing back.
Step Two…Plan for incapacity. You’ll want to have a medical advance directive, including a health care proxy and health care powers of attorney, so you can name another person to make your decisions when you are no longer able to do so. Do not assume that because you are married that your spouse will be legally able to make those decisions.
If you become incompetent and don’t have a medical advance directive in place, your family will need to go to court to get legal authority to make those decisions. This is a guardianship proceeding which is expensive, time-consuming, and stressful.
Step Three…There are similar activities that need to be done when it comes to making financial decisions. You’ll want to have a power of attorney so someone else can sign on your behalf and access your accounts. This should be a trusted individual who will look out for you and your family.
If you die and assets are solely in your name, your family will need to go to court before they can access any of your assets. This is the process known as probate. If you have an estate plan in place, your plan should include having some accounts that are POD or Payable on Death so your loved ones are not left without assets. Your estate planning attorney will recommend the right planning tools, so that your family is protected.
Finally, Step Four…Make sure you have tax planning as part of your estate plan. You likely won’t be paying federal estate tax but there are other taxes you may be subjected to when your estate is settled. There is a good chance your state has an estate tax or an inheritance tax. An estate planning attorney will be able to minimize those taxes through techniques like credit shelter trusts, gifting during lifetime or moving to another state.
When you have all four steps under control, you are in much better shape to live out those extra years they now say you will be getting. Planning ahead can help make those years much more enjoyable and have a much lower burden on your family and loved ones. Your estate planning attorney should be able to guide you through all of these as you assemble your estate plan.