Bruce Helmer and Peg Webb
America is a culture that denies death. We don’t want to think about death, talk about it, or recognize it as an inevitable reality. We all die someday, as do our loved ones, and yet this topic is often uncomfortable and swept under the rug.
As advisors, we see this every day in our interactions with clients. It is not uncommon for any of us to be in denial about our own mortality and to experience intense emotions when the topic comes up. Denial can be a coping mechanism, but it can also be harmful, depriving friends and family of special moments at the end of life, as well as the economic aspects of death.
And in America, these costs are significant.
According to Federal Reserve Board data, the cost of hospital treatment over the past three months can be more than $56,300 (not all of which is covered by health insurance), and hospice care costs average It could be more than $18,000. From 2016 University of Pennsylvania data.
Additionally, the direct costs associated with the death of a loved one can average $20,000 (funeral costs, accounting expenses, legal fees, and real estate fees). That’s according to a recent study by Empathy, a technology company that provides support for bereaved families.The average person takes 15 months to complete all the paperwork for a loved one’s affairs (including will 18 months for executors) to understand the economic reality of death.
Why does it cost so much at the end of life?
Progressive disorders are often accompanied by fatal illnesses. As people age, they become less able to do housework, cook, manage household finances, walk, and take care of themselves. The need for services such as occupational therapy, physical therapy, and home nursing care increases significantly as a result of disability, especially if a person wishes to live at home.
Most people who are dying need help during their final weeks, and often for much longer. Unfortunately, most people may not know that Medicare does not cover many of the services that dying people need, such as long-term nursing home care and home health aides. No. A notable exception is hospice, but qualifying for Medicare hospice can be difficult if the person has significant needs.
As a result, many families deplete their savings while caring for a dying loved one. Family members, who are responsible for most of the end-of-life care, are often burdened and stressed.
5 important documents needed for end-of-life planning
It is important to have a plan in place so that you will not be a burden to your family as you approach the end of your life. Before you start thinking about how to cover your retirement expenses, you should consider having these five documents in place.
• Wills: As a key estate planning document, a will helps determine who your assets go to when you die and ensures that your assets are properly distributed when needed. A will also specifies who will be the legal guardian of your minor children and who will take care of your pets if you become incapacitated.
• Power of attorney (POA): A POA appoints someone to manage your finances on your behalf if you are unable to do so. A general POA appoints someone to represent you in all matters (medical, legal, financial, etc.), whereas a limited POA appoints someone to represent you in all matters (medical, legal, financial, etc.), whereas a limited POA appoints someone to represent you in all matters (medical, legal, financial, etc.); A person will be appointed to act on your behalf only if (for example, you are unable to manage your personal information). medical emergency). If you are single and do not have a spouse, it is very important to obtain a POA. Without a POA, the court will decide who will be your guardian.
• Healthcare Advance Directive: A healthcare directive is very similar to a POA, but deals with medical decisions rather than financial ones. There are two main types of directives. A living will identifies a person’s instructions and wishes regarding their future medical care, especially end-of-life care if they are no longer able to make medical decisions. A health care power of attorney appoints someone to make health care decisions for you if you are unable (temporarily or permanently) to make them.
• Beneficiary designations apply to life insurance and retirement accounts such as 401(k)s, 403(b)s, and IRAs. Beneficiary designations determine who receives your benefits after you pass away, and importantly, they override anything in your will. It is wise to review beneficiary designations periodically, at least once a year.
• Trust: Not strictly a document in itself. A trust is a legal entity created to hold assets on behalf of beneficiaries. The person who creates the trust (the “donor” or “settlor”) can direct exactly when and how the beneficiaries receive the assets in the trust. There are many types of trusts, but we’ll focus on one that’s appropriate for end-of-life planning: an irrevocable trust.
Irrevocable trusts, as the name suggests, cannot be modified or terminated after they are established. The primary benefit of an irrevocable trust in an end-of-life situation is that the assets are removed from the donor’s taxable estate and the trust assets can be used for the benefit of the surviving spouse and receive certain tax benefits.
Trusts can be expensive and complex to set up and administer, so before adding a trust to your estate plan, always consult a financial advisor or estate planning attorney to ensure it makes sense. Please.
Investment and end-of-life planning strategies
Wealth Enhancement Group has developed a planning tool called Your Money Matrix to help individuals and families potentially maintain the income they need throughout their lives, especially as they near the end of their lives. Place your money in an account depending on how your assets and earnings are taxed (taxable, tax-deferred, tax-advantaged). Then use the following rules to set a clear deadline by which the account owner needs the funds.
• Short-term: Funds needed now or in the next 3-5 years. These should be low-risk investments.
• Medium-term: Funding required during the first 6 to 10 years of establishment. Balanced investments are generally recommended.
• Long-term: Money that may be needed more than 10 years into the future. You won’t need this money for at least 10 years, so these investments should be growth-focused.
Pull cash from each bucket over a multi-year strategy depending on your cash flow needs, current and future tax rates, and when you need it. The Money Matrix gives you the peace of mind that you will be able to provide for yourself and your family no matter where taxes, markets, inflation go, or if something unexpected happens, such as a fatal and debilitating illness.
Best way to prepare: Stay as healthy as possible.
According to Mayo Clinic doctors, about 30% of the quality of life as we age is due to genetics and 70% is due to lifestyle choices. Therefore, as we grow older, we have greater control over our quality of life. These include eating right, getting regular exercise, getting at least 7 hours of sleep each night, managing stress, quitting smoking, and reducing screen time (including caffeine and alcohol). (including limiting social interactions with family and friends).
End-of-life planning doesn’t always have to be done inconspicuously. In fact, it should bring more meaning and satisfaction to the limited time we have left.
The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations to any particular person.
Bruce Helmer and Peg Webb are financial advisors at Wealth Enhancement Group and co-hosts of “Your Money” on WCCO AM 830 Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com. Securities offered through LPL Financial, member FINRA/SIPC. Advisory services are provided through Wealth Enhancement Advisory Services, LLC, a registered investment advisor. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL Financial.
