Lessons From a Five-Hour Flight

On a recent flight from Charlotte to Los Angeles, I sat next to a gentleman who has had quite a rough year.  Without going into a lot of detail, he spoke with me about the recent passing of his father.  For many, the thought of losing a parent would be rather hard, but for my traveling companion, he spoke of his father’s passing as somewhat of a relief.  You see, his father began to suffer from cognitive impairment earlier in the year so much that he was eventually confined to a nursing home. His health deteriorated quite rapidly, and he was only in the nursing home for about three months when he passed.

The relief he and his mother felt was primarily emotional, but there was also mental and financial relief.  Specifically, the son was expected to make difficult medical and financial decisions on his father’s behalf, and one of those decisions included placing his father in a nursing home that cost about $7,000 a month—about $4,000 a month more than the couple was receiving from Social Security. In the end, the cost did not create too much of a financial burden on his mother, but he did reflect on the possibility that things could have been a lot worse.

Even though his parents did not have a lot of money, my friend was grateful for some simple estate planning his father did earlier in life. Likewise, we should do the same.  Here are several important devices you may want to include in your estate plan regardless of your financial position in life:

A Basic Will

A will is a simple document that provides instructions on how you want your probated assets distributed, but it also names an executor of your estate and a guardian for minor children, and it allows you to establish a trust should you want to leave specific instructions on when and how you want your assets used. There are several ways to write a will, and many employers offer will-preparation services at little or no cost to employees through a prepaid legal plan or employee assistance program (EAP).  Ask your employer if they offer such a benefit.

A Living Will

A living will, sometimes called a healthcare directive or advance directive, provides information regarding what forms of end-of-life care and treatment you are willing to receive when you are no longer able to make those decisions.  While this may not be the conversation you want to have around the holiday dinner table, it is an important one to have nonetheless.  Your state may provide instructions for drafting an advance directive, or you can draft and store your directives online at MyDirectives.com.

Powers of Attorney

A durable financial power of attorney allows you to designate someone to make financial decisions on your behalf, and a healthcare power of attorney allows you to designate a person to give medical instructions to your healthcare providers should you ever become cognitively impaired or incapacitated. My fellow passenger functioned as both for his father, and that relieved his mother from having to make what could have been some very stressful decisions.  Since this person will be called upon to make important financial and medical decisions, you will want to choose someone that manages their own money well and can deal well with stressful situations. Forms for electing a power of attorney can be found online, in an attorney’s office or office supply store, or through your employer’s legal plan or EAP.

A Long-term Care Insurance Policy

As my seatmate found out, custodial care can be rather expensive, Medicare only covers 100 days following hospitalization, and Medicaid doesn’t kick in until you have spent down most of your assets. According to the latest report by Genworth Financial, the median cost of an assisted living facility is $3,500 a month, and is over $6,000 a month for a semi-private room in a nursing home. If you have a sizable next egg (e.g., over $3M), you may not have a need for long-term care insurance, but if your assets are not quite that large, this form of insurance can help offset the high cost of custodial care.

You may not have to travel as often as I do, but if you ever find yourself next to someone on a five-hour flight to California, strike up a conversation with them.  You never know what you may find. You may just learn a thing or two that will benefit you, and your loved ones, for the rest of your life.

 

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