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Teaching Your Heirs to Value Your Wealth

Teaching Your Heirs to Value Your Wealth

Values can help determine goals & a clear purpose.

 

Provided by Terri Fassi, CPA, MBA, CDFA

                                                                                                                                

Some millionaires are reluctant to talk to their kids about family wealth. Perhaps they are afraid what their heirs may do with it. 

In a 2015 CNBC Millionaire Survey, 44% of families having at least $1 million in investable assets said that they had not yet told their children about their future inheritance. Another 27% said they had refrained from mentioning it until their children were 30 or older.1

It can be awkward to talk about such matters, but these parents likely postponed discussing this topic for another reason: they wanted their kids to grow up with a strong work ethic instead of a “wealth ethic.”

If a child comes from money and grows up knowing he or she can expect a sizable inheritance, that child may look at family wealth like water from a free-flowing spigot with no drought in sight. It may be relied upon if nothing works out; it may be tapped to further whims born of boredom. The perception that family wealth is a fallback rather than a responsibility can contribute to the erosion of family assets. Factor in a parental reluctance to say “no” often enough, throw in an addiction or a penchant for racking up debt, and the stage is set for wealth to dissipate.

How might a family plan to prevent this? It starts with values. From those values, goals, and purpose may be defined.

Create a family mission statement. To truly share in the commitment to sustaining family wealth, you and your heirs can create a family mission statement, preferably with the input or guidance of a financial services professional or estate planning attorney. Introducing the idea of a mission statement to the next generation may seem pretentious, but it is actually a good way to encourage heirs to think about the value of the wealth their family has amassed, and their role in its destiny.

This mission statement can be as brief or as extensive as you wish. It should articulate certain shared viewpoints. What values matter most to your family? What is the purpose of your family’s wealth? How do you and your heirs envision the next decade or the next generation of the family business? What would you and your heirs like to accomplish, either together or individually? How do you want to be remembered? These questions (and others) may seem philosophical rather than financial, but they can actually drive the decisions made to sustain and enhance family wealth.

Feel no shame in exerting some control. A significant percentage of families seek to define a purpose for transferred wealth. In CNBC’s survey, 32% of parents aged 55 or younger said they were going to specify what their heirs could use their inheritances for, and that was also true for 15% of parents aged 55-69 and 9% of parents aged 70 or older.1 

You may want to distribute inherited wealth in phases. A trust provides a great mechanism to do so; a certain percentage of trust principal can be conveyed at age X and then the rest of it Y years later, as carefully stated in the trust language.

This is a way to avoid a classic mistake: giving your heirs too much money at once. In fact, a 2015 Merrill Lynch Private Banking & Investment Group report notes that 46% of high net worth parents share that very concern.2

Just how much is too much? Answers vary per family, of course. In the aforementioned Merrill Lynch survey, 46% of families said that they wanted to avoid handing down the kind of money that would dissuade their heirs from realizing their full potential in their lives and careers.2

By involving your kids in the discussion of where the family wealth will go when you are gone, you encourage their intellectual and emotional investment in its future. Pair values, defined goals, and clear purpose with financial literacy and input from a financial or legal professional, and you will take a confident step toward making family wealth last longer.

     

Terri Fassi, CPA, MBA, CDFA  is a Representative with Centaurus Financial Inc. and may be reached at Fassi Financial, 970-416-0088 or terri@fassifinancialnetwork.com.

 

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

     

Citations.

1 – cnbc.com/2015/07/22/wealthy-parents-fret-over-inheritance-talk-with-kids.html [7/22/15]

2 – bankrate.com/finance/estate-planning/critical-questions-before-leaving-an-inheritance-1.aspx [8/6/15]

 

Moving Into a Nursing Home Facility

Moving Into a Nursing Home Facility

What you and your loved ones need to know.

 

Provided by Terri Fassi, CPA, MBA, CDFA

 

At some point, someone you love may make the transition from living at home to residing at an assisted-living facility or nursing home. When should that transition occur, and what factors must be considered along the way? And what don’t these facilities tell you?

When is it time? If an elder is a) safe and content at home, b) in reasonably stable health, c) can draw on personal or family resources for in-home care, d) has a sufficient “rotation” of family or professional caregivers available so as not to exhaust loved ones, then there may be no compelling reason for that elder to enter a nursing home or assisted-living facility.

If, on the other hand, an elder’s health notably worsens and caregiving strains your own health, relationships and/or resources, then the time may have arrived.

If it is time, is a nursing home really necessary? It may not be. Keep in mind that long-term care insurance will often pay for home health aides, adult day care, and forms of at-home nursing. This is called respite care, and perhaps 10-15 hours of these services per week will do. LTC insurance covers respite care. Even without LTC coverage, this level of care may fit into your budget.1 

Will an assisted-living facility suffice? If an elder is ambulatory and reasonably healthy, it might. Assisted-living (allowing an elder to have their own space plus quality care) costs much less than nursing home care, usually tens of thousands of dollars less annually. A Place for Mom’s Senior Living Price Index estimates the savings at $1,600-$2,300 a month. Most people pay for it using a combination of long-term care insurance and private funds.2

Is an assisted-living facility several steps above a nursing home? Its marketing will tell you so; truth be told, many assisted-living facilities are comparatively brighter, more comfortable and cheaper than nursing homes. 

Keep in mind, however: many assisted-living facilities do not offer their residents 24/7 medical attention, and costs may climb if your loved one needs or wants more than the basics in terms of care or comfort. According to Genworth’s 2016 Cost of Care Survey, the median yearly cost of a semi-private room in a nursing home now exceeds $82,000.3,4  

Are insurers raising premiums for LTC policies? Yes, significantly. As a Money article notes, yearly premiums for the more expensive policies can now exceed $2,300 for a 55-year-old man and $4,406 for a 55-year-old woman. Annual premium increases of 10% or more (sometimes much more) have occurred with disturbing frequency in this decade.5

Is long-term care insurance worth the cost, with the possibility that benefits may go unused? In some cases, it may not be. As CNBC notes, households with $2 million or more in assets may not need LTC coverage at all, while those with savings of less than $100,000 may get much of the help they need from Medicaid when the time comes.6

Alternatives have surfaced to traditional LTC insurance coverage. Recently, “hybrid” life insurance policies (and other life insurance products) have emerged that offer an add-on LTC benefit to consumers, for a price. Short-term care policies, while long available through certain insurance companies, are getting a second look. Some have benefit periods as long as a year, and they may be the only option for seniors with conditions that would disqualify them for an LTC policy.4,5,6

What isn’t said about eldercare? Nursing homes and assisted-living facilities are not predisposed to tell you about the downsides to their communities. So what isn’t usually expressed on the tour or in the brochure?

First, let’s talk about nursing homes. Genworth’s 2016 survey notes that the national median price for the typical shared room at a nursing home is $225 per day. Imagine handling that without help from LTC insurance or Medicaid. (Medicare will not pay for long-term nursing home care or home health care.)3,5 

According to the Centers for Disease Control and Prevention, an elder is twice as likely to suffer a fall in a nursing home as he or she is in the community. In fact, the CDC says that the average nursing home patient suffers 2.6 falls per year and that physical restraints do nothing to reduce the risk. If you have ever visited a nursing home and noticed a preponderance of residents in wheelchairs, it may be a response to liability as much as disability. A corollary to this: if residents are discouraged from being ambulatory, their leg strength may quickly diminish.7

If your parent or grandparent has known and trusted a family doctor for decades, there is a risk that the relationship may wane or end after a move to an eldercare facility. Nursing home residents are placed under the care of one or more staff physicians who more or less become their primary doctors. 

The rules and regulations governing care at assisted-living facilities can vary greatly among states and counties, and, while nursing home ratings are relatively easy to find online, reviews of assisted-living facilities are not. 

When considering an assisted-living facility, it is worth remembering that more than 80% of residential care facilities are for-profit businesses; roughly 40% of these facilities are outposts of national chains. In some cases, that can be a plus; in other cases, a minus.8

You may know someone whose parent or grandparent was asked to leave an assisted-living community. This circumstance isn’t all that rare, especially if an elder copes poorly with the advance of dementia. If a resident is particularly difficult, the possibility of eviction may arise. 

When the time comes, stay involved. Our lives are often busier than we want them to be, but our elders count on us to be visible and engaged in their lives after they enter assisted-living facilities or nursing homes. Your vigilance and support can make a difference in the experience for the one you love.

 

Terri Fassi, CPA, MBA, CDFA  is a Representative with Centaurus Financial Inc. and may be reached at Fassi Financial, 970-416-0088 or terri@fassifinancialnetwork.com.

 

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

«RepresentativeDisclosure»

  

Citations.

1 – nextavenue.org/take-break-caregiving/ [5/16/16]

2 – aplaceformom.com/senior-care-resources/articles/elder-care-costs [6/29/15]

3 – genworth.com/about-us/industry-expertise/cost-of-care.html [4/16]

4 – kiplinger.com/article/insurance/T027-C000-S004-short-term-care-insurance-policies-on-the-rise.html [10/15]

5 – time.com/money/4250147/long-term-care-insurance-rising-premiums/ [3/8/16]

6 – cnbc.com/2015/01/28/weighing-the-pros-cons-of-long-term-care-coverage.html [1/28/15]

7 – cdc.gov/HomeandRecreationalSafety/Falls/nursing.html [6/30/15]

8 – aplaceformom.com/blog/4-22-15-non-and-for-profit-assisted-living/ [4/22/15]

 

Signs of Elder Abuse

Signs of Elder Abuse

Physical, mental & financial warning signals.

 

Provided by Terri Fassi, CPA, MBA, CDFA

  

Is someone taking advantage of someone you love? June 15 is World Elder Abuse Prevention Day, a day to call attention to a crisis that may become even more common as baby boomers enter the “third acts” of their lives.1

Every year, more than half a million American elders are abused or neglected. That estimate comes from the Centers for Disease Control, and the frequency of elder abuse may be greater as so many elders are afraid or simply unable to speak out about what is happening to them. In some cases, the abuse is limited to financial exploitation. In other cases, it may encompass neglect and physical or emotional cruelty.1

What should you watch out for? Different varieties of elder abuse have different signals, some less obvious than others.

Neglect. This is commonly defined as withholding or failing to supply necessities of daily living to an elder, from food, water and appropriate clothing to necessary hygiene and medicines. Signals are easily detectable and include physical signs such as bedsores, malnutrition and dehydration and flawed living conditions (i.e., faulty electrical wiring, fleas or cockroaches, inadequate heat or air conditioning).

Self-neglect also surfaces, stemming from the declining physical or mental capacity of an elder. If he or she foregoes proper hygiene, disdains needed medications or medical aids, or persists in living in an insect-ridden, filthy or fire-hazardous dwelling, intervene to try and change their environment for the better, for their health and safety.

Finally, neglect may also take financial form. If someone who has assumed a fiduciary duty to pay for assisted living, nursing home care or at-home health care fails to do so, that is a form of neglect which may be defined as elder abuse. The same goes for an in-home eldercare service provider that fails to provide an adequate degree or frequency of care.2

Abandonment. This occurs when a caregiver or responsible party flat-out deserts an elder – dropping him or her off at a nursing home, a hospital, or even a bus or train station with no plans to return. Hopefully, the elder has the presence of mind to call for help, but if not, a tragic situation will quickly worsen. When an elderly person seems to stay in one place for hours and appears confused or deserted, it is time to get to the bottom of what just happened for his or her safety.

Physical abuse. Bruises and lacerations are evident signals, but other indicators are less evident: sprains and dislocations, cracked eyeglass lenses, impressions on the arms or legs from restraints, too much or too little medication, or a strange reticence, silence or fearfulness or other behavioral changes in the individual.

Emotional or psychological abuse. How do you know if an elder has been verbally degraded, tormented, or threatened in your absence, or left in isolation? If the elder is not willing or able to let you know about such wrongdoing, watch for signals such as withdrawal from conversation or communication, agitation or distress, and repetitive or obsessive-compulsive actions linked to dementia such as rocking, biting or sucking.2

Financial abuse. When an unscrupulous relative, friend or other party uses an elder’s funds, property, or assets illegally or dishonestly, this is financial exploitation of the elderly. This runs all the way from withdrawing an elder’s savings with his or her ATM card to forgery to improperly assuming conservatorship or power of attorney.2

How do you spot it? Delve into the elder’s financial life and see if you detect things like strange ATM withdrawals or account activity, additional names on a bank signature card, changes to beneficiary forms, or the sudden absence of collectibles or valuables.

Examine signatures on financial transactions – on closer examination, do they appear to be authentic, or studied forgeries? Have assets been inexplicably transferred to long-uninvolved heirs or relatives, or worse yet apparent strangers? Have eldercare bills gone unpaid recently? Is the level of eldercare being provided oddly slipshod given the financial resources being devoted to it?

Respect your elders; protect your elders. Some people aim to exploit senior citizens. Others simply don’t recognize or respect the responsibilities that come with eldercare. Whether the abuse is intentional or not, the emotional, physical or financial harm done can be reprehensible. Talk to or check in on your parents, grandparents, siblings or other elders you know and care for to see that they are free from such abuse.

Terri Fassi, CPA, MBA, CDFA  is a Representative with Centaurus Financial Inc. and may be reached at Fassi Financial, 970-416-0088 or terri@fassifinancialnetwork.com.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

Citations.

1 – cdc.gov/features/elderabuse/ [6/9/14]

2 – ncea.aoa.gov/FAQ/Type_Abuse/index.aspx [2/10/15]