Smart money is money your clients want to control and be able to access during times of need. While there are several options for where to keep this smart money, one that’s often overlooked is permanent life insurance. It can provide the opportunity to build cash value for financial needs down the road, while also providing death benefit protection to help a family continue or to pass down a legacy.
The primary purpose of life insurance is to provide a death benefit to beneficiaries. It can be designed to meet your clients’ changing needs with features such as flexible death benefits and flexible premiums. Death benefit protection can make life insurance an attractive choice for establishing a self-completing plan to help fund a college education. Permanent life insurance that can accumulate cash value may be used to help pay for college costs.
The reality is no one on this planet NEEDS life insurance. Life Insurance is a WANT. If you were to die unexpectedly and you have a stay-at-home-wife and 3 young kids, surely, they would survive. Sadly though, they may lose their house and end up on the streets, or in a one-bedroom apartment, or living with a family member, but they would survive. Perhaps your widow would have to remarry in order for your children to be well taken care of.
The amount of life insurance you get ultimately comes down to this: Do you want your family to live a worse life, an equal life, or a better life, financially, after you are gone? Would you not want your family to live the best life possible?
You and your family have goals and dreams. These goals and dreams may depend on two incomes or they may depend on the breadwinner’s income and the other spouse holding down the fort and taking care of the family. It’s a team effort. It requires the effort of both individuals to live the life you’re currently living. The goals and dreams for your family should not change just because you’re gone.
When considering life insurance coverage, here some things to ponder:
Everything in life is becoming more expensive
Due to inflation, a million dollars today will not be a million dollars 5 years from now
As you go through life, your lifestyle increases and goals change, so will the amount of life insurance needed to maintain the comfort of this new lifestyle
If you can’t afford your current lifestyle with one income, your spouse surely can’t afford it when the other passes away
When you pass, your spouse may end up with a higher tax liability due to “single” status
There will be bills that need to be paid, funeral costs, and possibly even estate taxes
You may have a business. This means you have a family and employees depending on you. Proper planning will increase the chances you family, your employees, and your business will be taken care of when you are gone.
Do the right thing and make sure your family is taken care of if something should unexpectedly happen to you.
More than half the states have enacted “filial responsibility” laws. These laws make adult children responsible for their parents’ medical bills if their parents cannot pay. These laws are designed to minimize the parent’s burden on the state’s welfare system.
In some states, you are legally obligated to support your parents if they can’t do it themselves. That support includes basic needs, such as food, housing, and even medical care. This means, if you are in a filial state and your parents start accumulating healthcare bills they cannot pay, the healthcare provider may be within their right to sue you.
Most states with these laws don’t currently enforce them, but with the rise in healthcare costs and a growing senior population, experts predict a rise in enforcement.
Laws in each state differ, but there are commonalities when it comes to enforcement. You will most likely be responsible for a parent’s medical bills when:
Your parent doesn’t qualify for Medicaid
Your parent is impoverished
Your parents have medical bills and cannot pay for them
You have the ability to pay, or your parents fraudulently transferred assets to you.
Even if you do not currently live in a state with filial laws, these laws should be a consideration in all major financial decisions, both for you and your folks. Overlooking these laws can be an expensive mistake shall your state decide to implement these laws.
A few things to keep in mind
You can be sued for your parents’ long-term care bills
You may face civil or criminal penalties
Financial transactions between you and your parents should be scrutinized. Transactions between you and your parents may be deemed as “fraudulent conveyance”, which is a property transfer that is intended to defraud creditors. You may also risk violating Medicaid asset transfer rules, which would make your parents ineligible for Medicaid.
You may have to sue siblings to recover funds. States differ by law, and it’s unclear as to how siblings and spouses share responsibility for the medical debt. If a healthcare provider comes after you only, and a judgment is rendered against you, it’ll be up to you to sue your family and recover their share of the debt.
Unfortunately, if you live in one of these states, you can be forced to pay these bills. If you do not live in one of these states, it does not mean the laws in your state won’t change.
It’s a good idea to get involved in your parents’ financial planning and healthcare decisions now. If the medical bills end up your responsibility, it’s ideal to have a solution to the problem beforehand.
Here are some simple steps to help avoid the drama and expense of the situation
1. Start the conversation with your parents
It may be awkward, especially if you’re not close with your parents. Permanent life insurance is the solution to the problem. They can use the cash value inside the policy while they are still alive.
They can use the policy to transfer wealth to you and other siblings. By using this as a strategy to transfer wealth, there is less chance the government or the healthcare company will get their money.
2. Collaborate with your family members
3. Consult with an elder care attorney
Eldercare attorneys specialize in issues involving long-term care and Medicaid. A good attorney can help you and your family create a good strategy so you are not giving your money away to the government or to someone else.
4. Help them qualify for Medicaid
A team of good financial professionals, including a CPA and a good financial advisor can help an attorney lower your parent’s income and assets so they are eligible for Medicaid.
Talk to your parents today about their finances and the plans they have made. The earlier you have this conversation, the more time you have to plan a strategy that protects you and provides them with access to the care they need.