Comparing Different Options in Life Insurance

March 18th, 2015

Certain forms of life insurance can be used as an investment and estate planning tool as well. Understanding the different options, term life insurance and permanent life insurance, can help to protect your family’s economic security in the event of an unexpected death.

Term life insurance
Term life insurance is pure risk protection, and it is what many families consider to be essential. The premium is paid for a certain term, or number of years, and the death benefit is paid out only if the insured person dies before the term ends. Term life insurance is much less costly than permanent life insurance, for the simple reason that the insurance company expects to only have to pay out the death benefit for about five percent of policies.

Within term life insurance, a common type is guaranteed level premium term life insurance, in which the annual premium remains the same for the entire term of 10, 15, 20 or 30 years. Insurance companies may also offer return premium term life insurance. With this type, some of the premiums paid are returned if the policyholder outlives the term, minus fees that the insurance company retains. This type of term life insurance is more expensive.

Permanent life insurance
With permanent life insurance, there is no fixed term, and the policy is in place for the insured person’s entire life. As long as the premiums are paid, then a death benefit will be paid when the person dies. Because the insurance company knows it must pay out a benefit, the premiums it charges are much higher than for term life insurance.

Permanent life insurance is typically comprised of an insurance portion and a savings or investment portion. The insurance company invests part of the premiums paid, and the policy builds up a cash value on a tax-deferred basis. The policyholder can usually borrow against the cash value.

The basic form of permanent life insurance is known as whole life insurance. A more flexible form is known as universal or adjustable life insurance. With a universal life insurance policy, one may choose to pay premiums at different times and increase the death benefit. One may also select a fixed death benefit, or an increasing amount equal to the face value of the policy plus the cash value amount.

 

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The Cost of Aging in America

February 27th, 2015

emily newhookOur guest blogger this week is Emily Newhook, the community relations manager for the online master of public health (MPH@GW) offered through the Milken Institute School of Public Health at The George Washington University. She lives in Washington, D.C. Follow her on Twitter @EmilyNewhook.

In 2010, there were 40.3 million Americans ages 65 and older — 12 times the number in 1900. Thanks to the incredible number of medical advances made over the past century, aging Americans are living longer, in greater comfort, and in better health than ever before. But can we afford it? This is the focus of The Cost of Aging in America, a new infographic published by MPH@GW, the online MPH degree offered through the Milken Institute School of Public Health at the George Washington University.

Today, the average health care expenses for those 65 and older is $10,082. While income levels of aging Americans are increasing, they simply aren’t keeping up with the rising costs of their medical bills. It is estimated that by 2040, aging adults will spend more 45 percent of their household income on health care.

In addition, it is projected that 70 percent of those over 65 will require long-term care at some point in their lives. However, 90 percent of aging Americans want to remain in their homes for as long as possible. The costs associated with in-home care are exorbitant — and often out of bounds for many patients and families.

What does this mean? The rising costs of health care for aging Americans also affects their loved ones. The AARP estimates that family caregivers provided a whopping $450 billion in unpaid care in 2009 alone.

The MPH@GW Cost of Aging infographic also illustrates that when it comes to professional caregivers, we are not providing adequate compensation or training. It is expected that within the next 10 years, the demand for paid caregivers will grow 49 percent. While personal care aides and home health aides might be one of the fastest growing careers, they also average the lowest salaries — a measly $20,000 a year. Training is minimal — federal mandate only requires 80 hours of training to be certified as a personal care aide — and turnover is high.

So what actions can our health care system take to better support our aging population and the people who care for them?

The infographic suggests the following:

  • Invest in direct-care providers to better manage chronic disease.
  • Provide resources that help patients continue care beyond hospital walls.
  • Make it easier for providers to access patient medical records.
  • Increase end-of-life education.

What do you think?

What financial challenges do you anticipate as you or a loved one gets older? What resources do you have at your disposal? What changes would you like to see to address the rising costs of health care? Please share with us your opinions by leaving a comment below.

 

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Estate Planning Changes for 2015

February 12th, 2015

By Erica Fitzgerald, Esq., Littman Krooks LLPErica Fitzgerald

The American Taxpayer Relief Act of 2012 (“ATRA”), enacted in January 2013, made changes to the laws governing Federal estate and gift taxes. Specifically, the Federal estate and gift tax exemption amount was set at $5,000,000, and provides for annual increases to account for inflation. As a result, as few as 1% of estates are expected to owe Federal taxes.

In 2015, the Federal estate and gift tax exemption is $5,430,000 for individuals, up from $5,340,000 in 2014. This means that individual estates valued at $5,430,000 or less will not be subject to Federal estate and gift taxes. The Federal lifetime gift exemption, which also increased to $5,430,000 in 2015, is tied to the estate tax. An individual can make gifts during his or her lifetime, but must file gift tax returns with the IRS. Specifically, an individual can give away up to $5,430,000 over the course of his entire life, over and above gifts which qualify for the annual Federal gift tax exclusion, without incurring Federal gift taxes. Dollar for dollar, however, the amount given away during the donor’s lifetime will reduce the amount that can be given away free from Federal estate taxes at the donor’s death. Individual estates whose value exceeds $5,430,000 are subject to a 40% Federal estate tax.

These two exemptions are not to be confused with the annual Federal gift tax exclusion, which will remain $14,000 in 2015. This annual exclusion allows an individual taxpayer to make gifts of up to $14,000 each to an unlimited number of recipients in a single year without having to file a Federal gift tax return on those gifts.

The Federal estate and gift tax exemptions currently available have shifted the focus of estate planning. Since most estates are now exempt from Federal estate and gift tax, estate planners focus on planning to minimize capital gains, income taxes, state estate taxes and creditor claims.

 

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Understanding the Stages of Alzheimer’s Disease

January 30th, 2015

Alzheimer’s disease starts with mild, sometimes unnoticeable symptoms that slowly have a more and more significant effect on a person’s ability to function. The rate of progression varies from a couple of years to twenty years or longer, but Alzheimer’s will eventually progress through the following stages, as described by Barry Reisberg, M.D. of the New York University School of Medicine’s Silberstein Aging and Dementia Research Center:

Littman Krooks Elder Law

Littman Krooks Elder Law

Stage 1: No symptoms of dementia are present. However, evidence shows that changes to the brain begin long before symptoms develop.

Stage 2: Very mild cognitive decline begins, which can be similar to normal changes associated with aging. The person may have trouble finding words or misplace things easily, but dementia cannot be detected in an exam.

Stage 3: Mild cognitive decline that starts to be noticeable to family or co-workers. Issues such as trouble remembering names, finding the right words, short-term memory, and planning and organization, but diagnosis may not be possible.

Stage 4: Moderate cognitive decline that can be diagnosed as early-stage Alzheimer’s disease. The symptoms are more clear in this stage, and will include short-term memory issues, trouble with mental math, difficulty performing complex tasks and changes in mood.

Stage 5: Moderately severe cognitive decline, also known as mid-stage Alzheimer’s disease. At this time, the cognitive decline is noticeable, and often the person’s ability to perform activities of daily living (ADLs) like cooking and grocery shopping begins to decline. Confusion is pronounced.

Stage 6: Severe cognitive decline occurs. Memory continues to get worse, and personality changes occur. The person may have trouble remembering their personal history, may forget the names of their spouse or caregiver and may need help with ADLs such as dressing and toileting. Changes in sleep patterns are common, and wandering can be a problem. Suspiciousness, delusions or compulsive behavior may develop.

Stage 7: Very severe cognitive decline, also known as late-stage Alzheimer’s disease. The person is no longer able to carry on a conversation, respond to the environment, or control their own movements. The person needs extensive help with ADLs, including eating and using the toilet. This stage of Alzheimer’s becomes fatal.

For more information about resources for Alzheimer’s patients and caregivers, visit http://alz.org.

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How to Make Health Care Decisions for Someone Else

January 23rd, 2015

By: Bernard A. Krooks, J.D., CPA, LLM (in taxation), CELA, AEP® (Distinguished)

Maybe you’ve been named guardian (of the person) for a family member, colleague, or friend. Maybe you’ve been listed as an agent in a health proxy. Maybe you’re a family member with authority to make health care decisions (New York, like a number of other states, permits family members or others to make most health care decisions in at least some cases). How you got there is not the point, at least not for today. Today’s question: how do you go about making decisions for someone else when you have been given the power — and responsibility — to do so?

For centuries the American common law (and its English predecessor) focused on the “best interest” of someone who was no longer able to make their own decisions. It was not until relatively recently that the concept of “substituted judgment” began to seep into legal discussions. Today the latter notion drives health care decision-making in most cases.

But what does that mean? One early description suggested that a person making decisions for someone else should try “to reach the decision that the incapacitated person would make if he or she were able to choose.” That means that the decision-maker should try to substitute the patient’s decision for his or her own, not the other way around. In other words, the guardian/agent/surrogate should first try to figure out what the patient/principal would want in the circumstances.

Let’s simplify some of the language, just to keep things from bogging down in legalisms. Let’s use “principal” for the person signing a health care proxy, or subject to a guardianship, or (however they got there) presently incapable of making decisions. The person making the decision, signing the hospital’s forms, choosing a facility, or whatever — we’ll call him or her the “surrogate”.

So now you’re the surrogate, and you’re trying to figure out what you should consider when making your decisions. Here’s a list (probably not comprehensive) of things you might look to:

Did the principal sign any documents? A living will, for instance, might give some insight into the principal’s wishes. There are plenty of other documents that might be useful, though — from worksheets filled out at a seminar on advance directives to letters to family members to descriptions of other patient’s circumstances.

Did you have any conversations with your principal? Maybe you talked about other patients in the news, and how your principal felt about their stories. Be careful here — we remember one client who adamantly said she didn’t want to “go through what Terri Schiavo did.” It wasn’t until we followed up with the client that we figured out that she meant that she thought it was terrible that the legal system allowed Ms. Schiavo to die. We had assumed that she meant she wouldn’t have wanted to be kept alive, but that was the exact opposite of her meaning.

Did anyone else have conversations with your principal? Ask family, friends, co-workers and others who might have discussed health care issues with the principal while they were still capable of forming a decision.

Ask your principal. Is he or she able to talk at all? Then ask for direction. That doesn’t mean you have to follow whatever a now-demented patient says he or she wants — the principal might simply respond affirmatively to almost every question, making the answer depend on how you ask. But just because you’ve been given responsibility for the decision it does not follow that your principal’s opinion is no longer relevant.

Consider your principal’s life history. Was he or she particularly religious, or irreligious? Do you know what family members would prefer (and whether your principal would be more likely to agree with or oppose the family)? Did other family members or acquaintances go through similar circumstances, and is your principal’s response helpful to you while making this decision?

Talk to the medical team. What seems like a major decision might not seem so significant after you’ve discussed the risks and burdens associated with a given procedure (or decision to forego a procedure).

If you can’t figure out what your principal would want, then you move from applying “substituted judgment” principles to determining the “best interests” of your principal. But that doesn’t necessarily mean that you have to approve treatment.

Weigh the “burdens” of treatment against the benefits. Is a proposed operation painful, dangerous, or uncertain? Or might it alleviate pain, make your principal more comfortable, or increase the odds of recovery?

Strive for consensus. You are supposed to be figuring out what your principal would want, but the input of family, friends and the medical community is worth considering in an attempt to avoid infighting, undercutting and acrimony. Your principal’s care might not be best-served by having a difficult situation made more tense.

As a last resort, consider submitting difficult choices to the courts for resolution. That gives everyone a chance to air their positions in a formal setting, and focuses the questions on the principal’s wishes — and care. But it is time-consuming and expensive, and should not be invoked unless there is real difficulty in making the correct decision.

It is a challenge to make health care decisions for someone else. It is also a terrific gift to the principal to accept the responsibility and discharge it carefully and well. Another day we’ll write about how you can make that job easier when you’re the principal rather than the surrogate. In the meantime, take the surrogate’s job seriously, and do your best to substitute your principal’s decisions for those you might make for yourself.

 

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LGBT Issues in Retirement – SAGE – Hilary Meyer & Catherine Thurston

January 20th, 2015

Bernard A. Krooks discusses LGBT Issues in Retirement with Hilary Meyer, Director of National Programs, and Catherine Thurston, Senior Director, Services and Training of SAGE (Services & Advocacy for Gay, Lesbian, Bisexual and Transgender Elders) on his first podcast of Peace of Mind with Bernie the Attorney for 2015.

 

 

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Guest Blog: Are You Worried about Outliving Your Money in Retirement? A Life Settlement could be a Game Changer for You.

January 7th, 2015

Cheerful senior couple moving into new home smiling at cameraOur guest blogger this week is Jamie Mendelsohn, Vice President, Ashar Group.

Due to medical advances and healthy lifestyles, many seniors are going to live longer than they planned on. As a result, seniors are working longer and delaying retirement to help compensate for an anticipated shortfall in retirement income. The Life Settlement option has emerged as a viable option to consider when it becomes apparent that you are in danger of outliving your savings and in need of liquidity to maintain your lifestyle for years to come. A life settlement is a liquidity option where you can appraise an unneeded or unaffordable life insurance policy that you currently own and potentially sell it for more than the cash surrender value. A study from the Government Accountability Office concluded that life settlements offered seniors approximately 8 times more than the surrender value as opposed to just letting their life insurance policy lapse. That’s additional income that can be used to fund long-term health care needs, retirement needs, or simply as a way to offset the costs of living on a fixed income while trying to keep pace with inflation.

So how do you know what a policy is worth? No different than your home or any other assets that you own, you can have your life insurance policy appraised or valued in the Secondary Market. While many seniors can benefit from a SMV®, Secondary Market Valuation, those who have health conditions that were developed after the policy was issued years ago, are the ones who benefit most. Ashar Group provides a simple online tool to help you evaluate if your policy might have hidden value that can be uncovered to help you supplement your retirement. It’s a quick and easy 7-question quiz that you can access at www.ashargroup.com/quiz/start.

Jamie Mendelsohn is a Vice President for the Ashar Group in Orlando, Florida. Ashar is a independent life settlement brokerage firm that partners with your advisor to design your case and represent you in the secondary market bidding process to assure that you get the highest offer possible. Jamie can be reached at Jamie@ashargroup.com.

 

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Which is Better: Guardianship or Power of Attorney?

December 17th, 2014

By: Bernard A. Krooks, Esq., Certified Elder Law Attorney

Here’s a question we get asked a lot: “which is better for me to get for my mother — a guardianship or a power of attorney?”

The question itself is misleading, and our answer almost never satisfies. The problem is simple: if your aging parent needs someone to make decisions (medical, financial or otherwise) for him or her, you almost never have a choice about whether to pursue getting a signed document (like a power of attorney) or a court order (like a guardianship). Why not? Because if your parent is able to sign a power of attorney, he or she is probably not a candidate for a guardianship.  Conversely, if you could get a guardianship order, your parent probably doesn’t have the legal capacity to sign a power of attorney.

A “guardianship” is a court proceeding in which one person is given decision-making authority over another person’s personal and financial matters.  New York even has a procedure for a “consent” guardianship, which would allow the court to appoint a guardian even though the person in question has capacity but is willing to allow appointment of a guardian.

In order to have the court appoint a guardian for someone else, you would need to show, by clear and convincing evidence, that the person you are seeking guardianship for (1) is unable to provide for his or her own personal needs and/or property management and (2) cannot adequately understand and appreciate the nature and consequences of such inability.  This determination is primarily based on the person’s functional level and functional limitations.

A power of attorney, on the other hand, does not involve courts at all.  Signing a power of attorney is a voluntary act undertaken by an individual with capacity who understands the purpose and effect of his or her signature. As you can see, that is likely not possible for most people for whom a guardian could be appointed.

So the question is usually not which approach would be “better” — it is which approach is possible. If the individual is not able to sign a power of attorney, we usually add our own question to the mix: is getting a guardian appointed the best way to handle the problems that have arisen — is it even necessary to pursue guardianship?

Now pose the question differently. You are an adult with full legal capacity, thinking about your future. You are worried about having someone available and able to take over your personal (health care) and financial decisions if you should become unable to do so yourself.  Is it better for you to sign a power of attorney, or should you simply rely on the legal system to establish a guardianship when the time comes for you?

The answer to THAT question is easy, at least in the vast majority of cases. The cost, difficulty, and invasion of your personal dignity involved in a guardianship almost always makes it better for you to sign a power of attorney now, while you can make your own choice. Who should NOT sign a power of attorney? Really only people who have no one trustworthy enough to take responsibility (and there are people in that unfortunate situation — too many people, in our experience) should make a conscious decision to NOT sign a power of attorney.

Notice that we have not distinguished here between health care decisions and financial decisions. That’s because the same values and decisions apply to both.  However, in New York, at least, there is one important difference between the two decisions: your next of kin might have the authority to make some health care decisions for you even though you have not signed a health care proxy (and no court proceedings have been initiated).  However, family members — even spouses — do NOT have any authority to handle your finances without a power of attorney.

Which is better? If you are in a position to plan for yourself, it is almost always a good idea to choose an agent (you can choose different financial and health care agents, if you’d like) and sign powers of attorney.  Do it now — don’t wait until you actually “need” the documents, because that will almost certainly be too late. Don’t rely on your belief that everyone knows what you want — that carries no weight in the legal system, unless it has been reduced to writing.

If you’re facing the problem from the adult child’s perspective, we’re sorry to say that it’s almost never relevant to tell you which approach is “better.” Usually it is a question of which is available.  We can help, but it is likely to be more expensive and difficult if your relative didn’t get around to signing a power of attorney.

 

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Making Changes to Medicare Part D Coverage

December 2nd, 2014

Medicare open enrollment is October 15 through December 7.  During this time, Medicare beneficiaries can make changes to their Medicare Part D coverage. Reviewing one’s options can ensure optimal coverage of prescription medications.

The key factors to review during open enrollment are:

  • Premiums – Some Medicare Part D plans will see a substantial increase in monthly premiums, while a few may actually decline in cost.
  • Medication coverage – Plans can alter which drugs are covered each year. In addition, some plans require prior authorization before covering certain drugs.
  • Co-payments and coinsurance – In 2015, all Medicare Part D plans will use tiered cost-sharing, in which the copay for a drug depends on the drug’s classification in the tiered system.
  • Preferred pharmacies – Most plans offer lower co-payments at in-network pharmacies.
  • Deductible – Some plans will be lowering their deductibles in 2015. It is important to compare the lower deductible to the higher premium that such plans often carry.

 

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Guest Blog: Palliative Care and Palliative Care Laws in New York: What Patients Should Know

November 21st, 2014

Our guest blogger this week is David C. Leven, JD, Executive Director, Compassion & Choices of New York

Palliative care can help improve your quality of life. You should know what palliative care is and how two New York State laws effective in 2011can help you learn about your palliative care options and receive timely palliative care.  The Palliative Care Information Act (PCIA), Public Health Law Section 2997-c,and the Palliative Care Access Act (PCAA), Public Health Law Section 2997-d, define palliative care as “health Care treatment, including interdisciplinary end-of-life care, and consultation with patients and family members, to prevent or relieve pain and suffering and to enhance the patient’s quality of life, including hospice care.” The care provided can address not only pain and other symptoms but depression, anxiety, psycho-social and spiritual issues as well.

Palliative Care Access Act (PCAA)

The PCAA  requires that  hospitals, nursing homes, home care agencies and enhanced and special needs assisted living residences establish policies and procedure to provide patients with advanced, life limiting conditions and illnesses who might benefit from palliative care, with information and counseling regarding such options appropriate to the patient.. It also requires that they facilitate access to appropriate palliative care and pain management consultations and services including but not limited to referrals consistent with patient needs and preferences.

Palliative Care Information Act (PCIA)

Terminally ill patients now have a clearly defined right to receive information and counseling about their palliative care and end-of-life options, including hospice. This will enable them to make informed treatment decisions during the final months of their lives. The law states, in part:

“If a patient is diagnosed with a terminal illness or condition, the patient’s attending health care practitioner shall offer to provide the patient with information and counseling regarding palliative care and end-of-life options appropriate to the patient, including but not limited to: the range of options appropriate to the patient; the prognosis, risks and benefits of the various options; and the patient’s legal rights to comprehensive pain and symptom management at the end of life; and information regarding other appropriate treatment options should the patient wish to initiate or continue treatment.”

The information and counseling under both laws should be provided to those lawfully authorized to make decisions for patients who lack capacity to make medical decisions, such as a health care agent.

What You Can Do to Get Palliative Care and the Benefits Required Under the Laws 

If you are a patient and believe that you may qualify for the benefits of either law or both laws or if you are a health care agent or surrogate for a patient who you believe has or may have a terminal or advanced life limiting illness or condition, then you might consider discussing this with the appropriate health care practitioner. If you are a health care professional and you believe that a patient of yours has not yet benefitted by the requirements of the PCIA and/or PCAA, then you might consider discussing this with the appropriate health care practitioner responsible for compliance with the applicable law (s) after conferring with the patient.

Resource: The New York State Department of Health website, questions and answers and guidance.

 

Learn more about Palliative Care and the Palliative Care Laws in New York, by visiting  Compassion and Choices.


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