Dear Mr. Miller:
I haven’t seen my attorney in 15 years. That’s when he did our trust. At that time, my husband and I had $75,000 in the bank and not much else. Now we have a San Diego house that has appreciated nicely over the years, $200,000 in the bank, some IRA’s and 401K’s and, of course, life insurance through our respective jobs.
I’m not sure if 15 years is a long time or not. But I guess it’s time to have everything reviewed. What types of things should I be thinking about before I call for the appointment?
Dreading the Visit to the Attorney
Trusts for Limited Net Worth
Preparing for the Attorney Visit–Read the Documents
Preparing for the Attorney Visit–Determine your Net Worth
Preparing for the Attorney Visit–Determine if Selected Managers and Beneficiaries are Still Appropriate
Order Taker vs Suggestions/Alternatives
Long Term Care
Traditional Long Term Care Insurance
Combo Product Long Term Care Insurance
Review Appropriate: Yes, I think it is time to see the attorney. I think it is way overtime! I’m guessing, with the house and life insurance you two are worth at least $1 million now. So things have changed—drastically—from 15 years ago. I usually suggest a visit every 2-3 years.
Trusts for Limited Net Worth: Truth is, I’m not convinced you needed a living trust back then. There are so many easier, and less expensive, ways to handle things when you have a limited net worth. Just to name a few: joint tenancy, pay on death accounts, life insurance beneficiary designations, all along with a Will and Power of Attorney documents. But that’s another story.
Preparing for the Attorney Visit–Read the Documents: First, I would pull out your old documents. Read them, and this may well be the first time you have done that. You won’t understand everything because it is in legalese; but that’s ok, just get the gist of what each of the documents is talking about. Who inherits when you die, what about when you both die? Who takes over management of your assets if you both lose mental competence (or one dies and the other is incompetent), who makes health care decisions in those situations, etc?
Preparing for the Attorney Visit–Determine your Net Worth: Once you know that, make a list of what you own and attach some values to each of the assets. Don’t know what your house is worth? Call a local real estate broker. Most will be happy to give you an estimate.
Preparing for the Attorney Visit–Determine if Selected Managers and Beneficiaries are Still Appropriate: Next step, decide if the people who were going to inherit are still your selections. Same with the people who were going to take over management of your assets or make health care decisions for you. Do you now have children when you didn’t before? Who do you want as guardians?
Order Taker vs Suggestions/Alternatives: Once you have done all that, you are ready to visit with the attorney. Hopefully, he won’t just be an order taker but will discuss with you your selections and thoughts, suggest alternatives, etc. Of course, that’s the difference between the online form and the professional.
Long Term Care: And then one more thing: how are you dealing with the long term care issue? According to statistics I found on the internet (how accurate I can’t say), 6.3 million people needed long term care in 2016. 63% of those needing long term care are 65 and older but a whopping 37% are younger than that; so this issue is not limited to just the aged. And the costs can be prohibitive. Acute to sub acute care in a skilled nursing facility can run $10-20,000 per month, or more. Have you thought about how you will pay for that?
Traditional Long Term Care Insurance: Most people simply can’t afford to pay that out of pocket for the disabled spouse and still have money left over for the well spouse to live out his/her life. That’s where long term care insurance (LTCI) comes in. But it can be really expensive and often times the premium is jacked up periodically by the insurance company in order to keep the program solvent. Further, many people don’t like such a program since if no use is made of it the premiums paid are simply lost. So most people shun this traditional approach.
Combo Product Long Term Care Insurance: As an alternative, there is something relatively new. It is often referred to as a combo product: a combination of a life insurance or annuity product along with LTCI. With many such policies, once purchased with a lump sum premium (as opposed to annual premiums), substantially more than that lump sum is immediately available for LTC. The cash value in the policy often times builds (probably quicker than the CD at the local bank); if long term care is needed, the cash is available to pay for it from the policy, and if it is not needed, it is there for the owner to withdraw in certain amounts periodically or for the family members when the owner dies. Further, it can generally be purchased with IRA money on a tax free basis. A policy such as this can be extremely useful, especially when coupled with documents that allow the necessary flexibility for the family to qualify for Medi-Cal.