ElderLaw Answers Blog

According to a survey conducted by Harris Interactive for The Hartford Insurance Company, three in five parents of the 2.6 million children with special needs have no plan to cover their cost of care when the parents can no longer do so themselves. 

In addition, of the 38 percent with a plan, most make costly mistakes.  Half would give an inheritance directly to their children with special needs and 58 percent name them as a beneficiaries of retirement plans and life insurance policies.  Many people with special needs cannot manage their money and are suscetible to others who may take advantage of them and the direct receipt of funds can mean that they become ineligible for important benefits programs such as Supplemental Security Income and Medicaid.

A special needs trust should be used to protect any funds left to an individual with special needs.  In addition, life insurance can be a useful tool for making sure that there are enough funds for the child with special needs when the parents are not longer able to provide support.  For more information on special needs planning, go to the web site of the Academy of Special Needs Planners by clicking here.

Our previously reported survey found that just over half of respondents wanted no estate tax and a further 19 percent favored only taxing estates larger than $3.5 million or $7 million for married couples (the threshold this year).  The remaining 30 percent of respondents would tax estates beginning at $1 million or at $2 million (the threshold last year).

Interestingly, however, our newer survey asked whether respondents would prefer an estate tax to raising income tax rates to raise the funds lost be eliminating the estate tax and almost three quarters said they’d rather keep the estate tax.

As you can see, what policy the voters want Congress to adopt depends almost entirely on how the question is phrased.  No one wants to pay taxes.  But if taxes are necessary to pay for needed government services, voters may well prefer an estate tax to higher income taxes.

The recently passed Republican majority worked hard to eliminate the estate tax, in part by calling it a “death” tax.  Their campaign neglected to discuss the trade offs between one tax and another.  An honest presentation to voters needs to put the issue in such a larger context.

Almost two years ago, Senators Kennedy and Harkin and Representatives Pallone and Dingell introduced the Community Living Assistance Services and Support (CLASS) Act to finance long-term chronic care for Americans with disabilities.  The Act would be financed by a payroll deduction and would pay either $50 or $100 a day to beneficiaries depending on their level of impairment.  Workers would have the ability to opt out of the program if they so chose.

With the prospect of comprehensive health care reform more likely under the Obama administration, the CLASS Act is gaining momentum.  Senator Kennedy has stated that he will not support a health care reform package that does not include long-term care coverage.  Aging and disability organizations have joined together to host a national call-in day on Wednesday, May 13, from 8:00 am to 6:00 p.m. eastern time.  Call 1-866-459-9232 to be connected to your senator’s office.

I recently had a call from a prospective client in his early 60s who had been diagnosed with prostate cancer.  His doctors estimated his life expectancy at about 10 years.  Fortunately, the man feels healthy now.  But this news has changed his life choices dramatically. 

No longer does he have the the life expectancy of the average 60-year-old American male of 21 years.  As a result, he had decided to retire early and to make the most of his remaining healthy years.

Fortunately, most of us do not have this man’s death sentence.  But unfortunately, at least for estate and financial planning purposes, we don’t know how long we will live nor how long we will be healthy and able to work.  We don’t know if we will live to a ripe old age in perfect health, or suffer many years of disability and dementia.

According to the Society of Actuaries, a man who reaches age 65 has a one in two chance of living beyond age 85 and a one in four chance of living beyond age 92. Women are likely to live even longer. For a couple reaching age 65, there’s a one in two chance that one spouse will reach age 92 and a one in four chance that one will reach age 97.

That is a huge longevity risk.  These numbers indicate that a single person needs to plan to live to at least 90 and a married couple needs to plan for on spouse reaching age 100. 

But not all individuals have the same life expectancy.  They are affected by their own health — as in the case of my prospective client — their lifestyles, and their genetics.  A family history of longevity would argue for financial planning that anticipates needing resources to last to an old age.  A family history of Alzheimer’s disease would guide an individual to purchase long-term care insurance.

While we cannot know our future exactly, we can determine the likelihood of living a certain number of years, as well as the likelihood of being healthy or ill during that time.  Companies make these predictions in the context of personal injury law suits and for insurance companies.  They can do it for planning purposes as well.  Companies that provide these “Longevity Curve Reports” include 21st Services, which will provide a report for as little as $60.

Other on-line services will also provide a life expectancy estimate at no charge.  But these will be based on self-reported information as opposed to an examination of medical records and they will provide on a single number, rather than likelihood of reaching various ages.  For instance, it may say that you can expect to live until age 86, rather than saying that you have a 25 percent chance of dying by age 80, and a 25 percent chance of living beyond age 90.  One of these free calculators can be found at the web site Living to 100.

Whether you purchase a report, use a free service, or make your own estimate based on your health, lifestyle and family history, an idea of how long you will live can help guide your estate and financial planning.