There is no more important time to set up a financial plan than when caring for a disabled or aging loved one who may need long-term care. We all want the very best for those we love, but there is no use in a caregiver going bankrupt because she is too busy caring for someone else to think about her own finances. Putting your own financial future at risk doesn’t help anyone.
As you prepare to rebuild your financial plans, here are some things that may change:
- Income: One or more people may no longer be able to work or may have to cut back their hours because of disability or caregiving. Therefore, the household income will likely decrease.
- Expenses: Whether caring for an aging or disabled person, it is highly possible that you will incur significant out-of-pocket expenses.
- Long-term estate planning: If you are caring for a child, this may change drastically. For example, I’ve had to establish a special needs trust for each of my children, which protects them from receiving money in their own name from our estate if my husband and I both die, and thus protects their Medicaid eligibility. The other function of these trusts are to assure that there will be funds available to sustain their standard of living after my husband and I pass away.
There are a number of insurance products worth investing in to ensure your finances are protected. Here are a few that are often useful to caregivers and their families for you to consider:
- Life insurance: You will want to look at term, universal, or a form of flexible permanent life insurance depending on your situation. It is also good to explore both retail and private placement life insurance if applicable. This can be both an estate planning and tax efficiency strategy for you and your family depending on how the policy is structured.
- Disability insurance: If your family and aging or disabled loved one are all relying on one income, it is important that the breadwinner have disability insurance to provide income security should she become disabled.
- Long-term care insurance: This can help to mitigate costs for nursing services and end-of-life care, either in-home or in a residential setting.
- Annuity: An annuity is an insurance product that will pay a fixed monthly income amount from a set date through the end of life. There are a number of different immediate and deferred annuity products on the market, so research carefully before selecting one to make sure it is the best fit for you and your loved one’s needs. Keep in mind that most cannot be bought and activated before a certain age.
You may need to consult financial planners, CPAs, investment advisors, insurance agents, and estate planning attorneys to make sure you and your family are adequately protected. I highly recommend doing the research to find someone that specializes in your specific situation.
Jennifer Turrell is a member of the DailyWorth Connect program. Read more about the program here.