Life Happens

Episode Transcript

(00:01):
Good morning everyone. Welcome to LifeHappens Radio, your weekly radio broadcast right
here at Talk Radio WGY. Iam Lupiro, your host for this morning,
and we have in studio a coupleof guests that I'm going to introduce
momentarily. If you're a first timelistener to Life Happens, we try to
bring you ideas and plans and anability to take all of the risks that

(00:25):
befall us as we go through ourlives, hence the name Life Happens,
and to prepare you to give youideas and thoughts on how to construct on
a state plan, a financial plan, and a plan for your family that
serves you and them in good steadthroughout your lifetime and beyond. So today

(00:46):
we're going to tackle the topic ofa state planning, and in particular a
state planning using a financial product thata lot of people say, well,
I don't believe in it, butit's a financial product. It's called life
and insurance, and in this case, life insurance with some twists. Because
life insurance products have become very flexible. They have multi purposes and we call

(01:10):
it multipurpose dollars. So you canbuy a life insurance policy that not only
covers the expenses and the need forliquidity upon your death, but it also
covers long term care during your lifetime. So we'll talk about how that all
plays in. And I'm going tointroduce my guests at this point, and

(01:32):
one is Patricia Wheelan from Peer o'connoranStrauss, one of our associate attorneys Mourning.
Patricia, Good morning, Good morningeveryone, And I'm going to call
you Patty, since that's what youasked me to call you. And so
Patty, just tell our listeners alittle bit about what you're doing with the
firm. And you are a newishattorney, I would say compared to some

(01:52):
of us. Yeah, I'm alittle bit newer, an attorney of about
eight months, but I've been withthe firm a little bit longer right now.
I do kind of a lot ofthings at the firm. Primarily I
do estate planning. I also dosome business planning along with that, and
I also help out with the trustand estate administration portion. And so Patty's

(02:14):
going to help us through the estateplanning side of things, and we're going
to take it from younger ages.The kind of planning you may be thinking
about. You might not be thinkingabout the fact that you usually have a
plan at age eighteen, but youshould. We'll talk a little bit about
that. But as you go throughyour early life, most people start thinking
about things when they get married,and more importantly and more poignantly, you

(02:38):
start thinking about things when you haveyour first baby and your second and third,
and then you become a responsible adultand responsible not only for yourself but
for a spouse and then ultimately foryour children. So we'll talk about that
evolution. And Patty works with clientsof all ages, young and old alike,
and at Pera, Conra and Strausswe cover the gamut, so we're

(02:58):
working with young couples, where we'rekingwith seniors and everything in between. Our
other guest this morning is a firsttimer here on Life Happens, Chelsea Whiteman
with Setia Advisors. Good morning,Chelsea, Good morning, and Chelsea is
an advisor on the financial side ofthings, and she's going to work with
us today to talk and explain theuse of life insurance and a state planning

(03:20):
and all the things that I mentionedthat life insurance can do for you.
Before we dig in, Chelsea,just tell our listeners a little bit about
your work, what you do,and how you got into this business.
Sure, So I'm a local fromChatham. I've been in the business for
twelve years. So I started rightout of college. Satara Investors is my
broker dealer. So Lou and Iactually share office space. Building we do

(03:46):
we do. I'm downstairs, he'supstairs. Forty three British American Boulevard.
Yeah, across the street from theWGY studios here past elevators on the right
hand side. So I do theplanning phase, so from start to finish,
fiduciary holistic planning. You know,whether you're starting out, whether you
are on the final stages of passingyour wealth income distribution, planning for health

(04:09):
care expenses, because they're going tobe there. How do we pass on
your assets most tax efficiently and youknow, hitting whatever unique goals you and
or your spouse or your kids mayhave. So wealth management side as well
as taking what you have and puttingon the puzzle pieces together along with your
CPA and attorney. So here weare an old man, two young ladies

(04:31):
sitting in the studio. We're goingto talk about a state planning Patty.
I'm gonna start with you because fundamentaldocuments. And I mentioned we do planning
for people at age eighteen, andyou think, well, why in the
world would you ever do that.But kids go away to college and they
may have an illness, they mayhave to go to the health center.
Parents worry about their children. Theywant to get information. My children would

(04:54):
call me up and say, hey, Dad, can you put some money
in my bank account? Well,I can't access their bank account. I
don't have an any authority. Anda parental authority ends at age eighteen.
Children are said in New York Stateto be emancipated at age eighteen, so
your parental authority and this applies ina whole realm of contexts when you think

(05:16):
about and I have some stories Icould tell about kids that may be on
the spectrum. They may have somedisabilities, they turn eighteen, they have
issues. Parents have no control,they have zero control over the kids at
age eighteen. And the kicker tothat is your parental duty of support doesn't

(05:38):
end until they're twenty one. Soyou have a three year twilight zone where
you have no legal authority over thatchild, but full legal responsibility to pay
for anything that they need, includinghospitalizations and medical care and things during that
transitional period. So, Patty,you work with parents and children on their
way to college, and what arethe documents that kids might need to have

(06:01):
when they go to school. Sothere's a couple of documents that we call
the core four. These are documentsthat we think that anyone should have,
regardless of how old you are.In particular, we think that having a
power attorney, a health care proxywill and also what we call a disposition

(06:21):
of remains appointment. These four documentsmake up what I previously called the core
four. And these are the fourmost basic but most important documents that a
person of any age, especially someonewho is over the age of eighteen,
should have. Well, they wantto make health care decisions. And a

(06:45):
parent is at being a parent andyou're not there yet. But my children
are all grown now. So I'vegone through four years of college three times
and gone through things where they werein the health center and I just couldn't
get information. They wouldn't tell meeven if my daughter was in the health
center. And as a parent,that's disconcerting. So the healthcare proxy is

(07:06):
one of those documents. And justtalk a little bit about that. So
the healthcare proxy allows a person toappoint someone to make health care decisions for
them if they're ever incapacitated or likeyou were saying, in a hospital and
they can't make them for themselves.So this would come in handy if a
child got injured and they were inthe hospital and the doctors needed some guidance

(07:29):
on what to do and you knowwhat instructions to follow. And for this
document, you're allowed to appoint oneagent at a time, so this could
be either mom and dad acting asthe primary agent to act for their child,
and then you can have success oragents appointed in the event that the
first one you appoint is not ableto not able to act or is unable

(07:50):
to serve in another way. AndChelsea, we get this question, and
I'm sure you do as well.When should our listeners start planning with regard
to life insurance and revisiting policies lookingat buying coverage? When does that process
store yesterday? Question? Yeah?Right? So as far as purchasing new

(08:15):
or considering something new, Uh,it's based upon agent health. So the
cost is always based upon agent health. I can't tell you what my health
is going to be in a weekfrom now, in a month from now,
and a year from now, infive years from now, right,
could be worse, might not bebetter. An age, right, I'm
not getting younger, so if Iwant my premium to be on the smaller
side, I need to do itnow. Right. You don't know what

(08:39):
your health could be. I meanI see people I have clients all the
time that great health and they havecancer, heart conditions, all these things.
So you're looking at one. Yeah, sooner you can do it,
the better. The thing with insurance, just like homeowners, right, you
don't want to be caught without it, right, So you do not want
to be caught without it. Ifyou don't need it, fine, like

(09:01):
you won, right, you cancash it back out. But if you
don't have it, right, whatI see all the time, which is
not a plan, is go fundme on Facebook. That's not a plan.
No, that is not a substitutefor life insurance. So if you're
even considering it. The other thingis you have to qualify, right,
So if you're even considering that youmay want it, you have to apply,

(09:22):
see what the price is. Butyesterday was probably the time you should
have considered. So people get religionabout life insurance when it comes time to
get the check, and you've boughta five hundred thousand dollars policy, which
when you're young, doesn't cost awhole lot, and you get a check
for five hundred thousand dollars. It'scash, it's income tax free, and

(09:46):
it's a state tax free, andyou can then take that money and do
the things that you need to do. So in our continuum here, we
started with college kids, and probablynot many of them are buying life insurance,
you know, while they're in college. But as you get out and
you start a career and you startworking, what are some of the options
that young people have to use lifeinsurance as part of their overall financial plan.

(10:07):
Yeah, so, I mean evenright out of college. I started
this job at twenty one, Sobefore I was twenty two, I had
two policies. I had a termand I had a variable whole life policy.
Again, twenty two, I wasat the peak of my health,
maybe you know, very very cheap. I didn't have a mortgage at the
time, but I knew I wouldhave won in the future. So instead

(10:28):
of waiting until I was twenty nine, which is when I bought my house
at that price, I locked inthe price at twenty two thirty year term,
right, and I covered my mortgage. I also used whole life,
So a whole life is great,you build cash. The thing about the
whole life that I'm thirty four now, so I got it when I was
twenty two. There's a loan featureon the cash value in my particular policy.

(10:54):
Let's just break it down. Yeah, for our listeners a little bit
more. You mentioned term, youmentioned whole life, and you mentioned variable
life or universal variable life. Yeah, all different kinds of policy. Yeah,
the most basic is term. Justhow do the term policies work?
Yeah? So term we always callit if insurance, so if you die
in this time period, it willpay out. Right, it's if insurance,

(11:18):
whole life or permanent or variable universal. Anything that builds cash is a
whole life policy. What that meansis you have it for your whole life.
And we call that a when insurancebecause you are going to die,
right, so this will pay outwhen you die. Yeah, we hadn't
figured that one out. Yeah,yeah, right. A lot of people
might tell me no they're not,and that's great, but yeah, it's

(11:41):
when insurance, which is all thewhole life permanent you have it until the
day that you die, versus term, which is if it's if in this
time period, whether it be ten, fifteen, thirty years, whatever your
term is, then it will payout. That's a great way to look
at it. So I mean tome, one of the greatest investment vehicles
is the roth IRA. So whenyou're young, you know, put that

(12:03):
six or seven thousand dollars that you'reearning into the wrath. But then when
you look at and that's tax motivated, right, because you get to grow
that money, not just tax deferred, but tax free, and tax free
growth doesn't exist in many places.You fund your traditional IRA or your four
oh one K, you're going topay one hundred percent income tax on that.

(12:24):
But life insurance is a favored assetin the government and then the tax
code. So all of the investmentsthat you're talking about, which are fixed
income investments in whole life, youknow the insurance company pays you an interest
rate. Or if you go tovariable life, you've got market based investments,
equities, mutual funds, you canbuy almost anything through a life insurance

(12:45):
policy, any kind of investment.Those all grow tax deferred. But you
mentioned the loan feature and if youuse the loan feature that all comes out
tax free. Is it correct?It does so. In my particular example,
I bought my variable whole life attwenty two, right, just because
I knew there might be a timein my life where I want to use

(13:05):
it. I'm thirty four, right, interest rates at this particular point in
time, if I were to buy, you know, a home, or
buy a boat or a car orwhatever, they're high. Right, you're
looking at anywhere between six and eightpercent. My particular policy that I have,
it's a six percent gross interest rate, but as I pay it back,
they credit me back four percent.So the net interest rate that I

(13:28):
am charged is two percent. AndI have that two percent loan for life.
Right, So if anytime interest ratesare high during my lifetime, again,
during your lifetime, during your kids, whatever it is, you get
onto the bank, they say,oh, yeah, you know, we're
going to loan you at eight Yougo, now, I'm going to use
my own insurance policy at a nettwo percent. Yeah, that's really powerful.

(13:50):
And you think about you bought itat twenty two, and let's say
that you retire at sixty two.Yep've got forty years correct of growth at
an interest rate if it's a wholelife that the insurance company is paying,
and they're usually better than market moneymarkets are CDs depending on the company,

(14:13):
but you could also be in marketbased investments. So if your portfolio inside
the policy, let's say just doesa conservative five percent, that's going to
double several times before you're sixty two. Yep, and you could do a
limited pay. So, you know, a lot of people kind of moan

(14:35):
over the idea of paying right insuranceuntil you're eighty years old. That's kind
of old school, you know,with some of the new policies, that
doesn't exist. Right. You canchoose to pay your premium for ten years,
for fifteen, for twenty. Idid a twenty year pay, so
I'll be done with my insurance payingit when I'm forty two. I will
have it forever. So if Ilive to one hundred and twenty one,

(14:56):
I will still have it. Right, the cash will grow, I will
have the benefit. The death benefitalso grows on a variable policy, so
I have that loan feature. It'sreally really flexible for you know, again,
life happens, right, so Ihave those features that I can use.
But I did it. You knowagain, I could get diabetes,
something had happened to me, Icould get into a car accident, and

(15:18):
I already applied, right, soI locked in my health and all of
those things at that time. Andyeah, earlier the better. So people
think about life insurance in a lotof different ways. I've seen a lot
of parents clients of mine who havebought policies for their children and when they're
born. Yeah, you can buythem for kids, yep. And they

(15:39):
have cash value accumulation yep. Andthey may buy a ten thousand or twenty
thousand dollars policy, a small policy, but as you put money into that
policy, it grows again tax deferredand ultimately tax free if you take it
out. And then sooner or laterthey give the policies to the kids because
then they start their own insurance portfolio. But do you see that, we

(16:00):
do it every day. Yeah,we see it every day. And the
child zero right, the age onthe application is zero. And again with
a limited pay policy. So thekid goes to college, let's say at
eighteen, so you set up yourpremiums to be paid for seventeen years.
Right when your kid goes to college, you have no premium anymore, you
can choose to continue it. Soyou can choose to do that, but

(16:22):
you've got the cash which either canbe used for college or you know,
a lot of parents just don't telltheir kid right They're like, I'm not
sure what's gonna happen when my kid'seighteen, So I'm going to let them
know when they're twenty five that wehave this. But yeah, every day
zero age zero for whole life policies. So most people don't really have an
understanding of all the uses of lifeinsurance and the facts that it's a tax

(16:44):
motivated investment vehicle for those assets growinginside of a policy, and you start
it. The younger you start it, the more that compounding. At the
eighth wonder of the world is thepower of compounding. The more that grows,
and the more you have a cashbundle when you want that cash that
you can just borrow out and you'reborrowing off your own policy and in Chelsea's
case, at a two percent rateversus what the banks are going to charge

(17:07):
you today. So that's our startof the conversation. Hope that was interesting.
I think the rest of it willbe as well. We're going to
take a short break. When wecome back, we're going to look at
the next stage of life insurance.When you really need death benefit, you
know, when does that death benefitneed to start? And when do you
need income replacement. So we're goingto build too, all the way to

(17:29):
long term care. So when youneed this policy later in life and you
need something like home health care,life insurance is a solution there too,
So stay with us. Chelsea Whiteman, Patty Whalen, Loupiro, we'll be
back after this short break. Welcomeback everyone. You're listening to Life Happens
Radio. I'm Lou Piro, yourhost for this morning, and we are
in studio with Paddy Whalen, anattorney at pier O'Connor and Strauss, and

(17:55):
Chelsea Whiteman, financial advisor with Satiran. We're talking about a state planning and
in particular how to work a stateplanning and life insurance. Back together again,
Patty, I'm going to come backto you because we don't work with
a lot of college kids directly.We work with their parents and they try
to put plans together. But ata certain point in time, life changes

(18:19):
and life happens in a very goodway. People get married people have children,
and for many people that that isthe experience that kind of leads to
a whole other set of planning ideasbecause now you're not planning just for yourself,
you're planning for other people. Sohow does that kind of evolve?

(18:41):
How does that an a state planevolve? What are the other documents?
We talked about a healthcare proxy,a little bit about a power of attorney.
Those are still very, very veryimportant, but talk a little bit
about the next level, which isplanning with a will and what kinds of
things go into the will. So, in addition to those other documents,
a will is important because it allowsyou to say where you want your assets

(19:06):
to go and how you want themto be distributed upon your death. This
document can also include information about whoyou want to be the guardian of your
children or if you have a specificproperty, who you want it to go
to and how much. And theguardian question is one that gets a lot
of people stuck because the husband,the wife, the baby, who is

(19:32):
going to be the person that takescare of that child if the parents are
no longer available, And that isone of the most emotional and one of
the most controversial issues that young couplesface. Is it going to be the
husband's parents, the wife's parents,brothers, sisters, and people have a
lot of different ideas. We tryto work through this particular provision with great

(19:56):
care, and there are a lotof different options that people can choose when
they start thinking about who the guardianis going to be. And in some
cases you'll say, oh, well, we have this couple, they would
be the perfect parents. They havethree kids of their own. You know
they're going to take my two inaddition to their three, and I know
that, you know they'd be onebig, happy family. Okay, what

(20:17):
if the wife does and it's justthe husband, do you want those five
kids with that one gentleman who's goingto be raising five children? Is that
going to be the ideal situation?So in some cases we would say,
okay, so if they're a couple, then it's them. But if it's
only one of them, then we'regoing to go to a couple number two.

(20:38):
And you can do a lot ofdifferent contingency plans in the guardian appointment,
but for young couples with young children, that becomes the most one of
the most important, if not themost important thing. To contain in the
will and to have a plan inplace if you're not there. You want
your kids well taken care of.Where are they going to have a theyre

(21:00):
going to stay in their own home, what schools are they going to go
to? All of those kinds ofthings. We'll get to the financial piece
of this in a minute, becausethis plays right to you, Chelsea.
But Patty, what else goes intothat will. The other things that are
involved in making a will include whoyou want to be decision makers, So,
for example, who do you wantto have to be in charge after

(21:22):
you pass so an executor. Inaddition, in some wills you can create
different types of testimary trust under them, So if you do that, you
might want to consider, you know, who you would want to be,
you know, a trustee of thosetrusts. You know, we were just
talking about children and children, aren'tyou know, they can't receive assets when
they're you know, when they're underthe age of eighteen so or even under

(21:45):
the age of twenty five. Someparents don't feel comfortable leaving money outright to
their kids until they reach a certainage. So being able to think about
and think about before you know itcomes into play. Who you want to
be in these roles is also important. There's at age eighteen again, because
when you're under eighteen, you don'thave any rights to property. So if

(22:07):
you leave assets to a child who'sunder eighteen, and this includes making them
a beneficiary of a retirement account anda lot of people do without even thinking
about it, or making them abeneficiary of a life insurance policy, somebody
has to go to court and petitionthe court to be appointed as that child's
guardian of the property, and thatguardian of the property is a co guardian

(22:29):
with the judge. So the moneygoes into a court ordered account with the
judge and the person who petitions thecourt as the co guardian, and they
have to go to court every timethey want to take money out of the
account. So it's a disaster.It is an absolute disaster if you don't
have trusts under a will created forthose miners, and then you're going to

(22:49):
choose your trustees. So how wouldwe look at that from the perspective,
do they have to be the sameas the guardian or should we think about
somebody else. I think that dependson the individual and the family. But
sometimes it's better to have them bethe same person because it allows everything to

(23:10):
move a little bit more smoothly.But sometimes it's also better to have different
people in those roles to sort ofact as like a check and balance on
each other. Yeah, that's alot of people like the checks and balances
idea. Because you have the guardians, they're living in a home. They
may move into your home, andthen you have a sum of money that's
going to be available. So arethey feathering their own nest, using it
for their own lifestyle, or arethey using it for your children? So

(23:34):
you trust the people you're going topoint a guardian, but at the same
time, having somebody else managing themoney is never a bad idea. We're
going to take a short break forthe news. When we come back,
we're going to talk about planning forcouples with young children and looking at how
that will works. But also thenhow do you put money in place to

(23:55):
pay for that four hundred thousand dollarscollege education. If you're not there,
stay with us listening to Life HappensRadio. We'll be right back after the
news and we're back. Thank youfor listening to Life Happens Radio. I
hope you're a longtime listener, andif your first time listener, this show
tries to bring you ideas that helpyou plan, help you put a plan

(24:15):
together for finance, for law,to make sure that you're protected, that
you have a comfortable retirement, thatyou've planned well, and that throughout your
retirement you're going to be financially secureand have the legal documents and the trusts
and other documents in place to serveyou well. I'm Lupiro, your host
for this morning. We're in studiowith Patti Whaling, associate attorney at pier

(24:38):
O'Connor and Strauss, and Chelsea Whiteman, advisor at Satira Advisors, and I
do want to give you a littleheads up on some education coming up.
We do a lot of work inthe senior markets, so we talk about
elder law, and we're elder lawattorneys and have a very robust elder law
practice. And part of that isplanning for long term care. And if

(25:00):
you have good insurance policy, whichChelsea's going to talk to us about in
a few minutes, that insurance policybecomes the plan and you have cash flow
and you have enough money to stayin your own home, hire the help
that you need and do all thethings that you need to do and want
to do to stay independent. ButMedicaid sometimes becomes the program that you have

(25:22):
to rely on if you don't haveenough financial resources. So we have at
our firm a program called Medicaid Monday, and it's the second Monday of each
month. We do it all yearlong, So we do twelve of them
and they're on our website if youwant to see our past episodes. But
the next one coming up will beMonday, August twelfth, and we're talking

(25:42):
about home care. We just dida show this past Saturday on Independence Day
and staying independent for life and howdo you keep your independence throughout your lifetime
and when your health fails, whenyour conditions come to the point where you
need help staying at home, howdo you get it, how do you
pay for it? And this comingAugust twelfth, we're going to talk about

(26:04):
home health care and how to findcaregivers, how to get Medicaid to pay
for those caregivers, and what theapplication process looks like for Medicaid. Frank
Hemming and myself will be putting thaton and it's August twelfth, from twelve
to twelve thirty. It's a crispthirty minutes. If you'd like to join
us, you can sign up onour website at pierolaw dot com. Go

(26:27):
to the events tab and you cansign up for Medicaid Monday on August twelfth.
You can always call our office atfive one eight four five nine twenty
one hundred and we would love toget your registered to join us for Medicaid
Monday on August twelfth at twelve noon. Frank Heming Lupiro and home care.
How do you keep that independence andfind the care that you need? So,

(26:48):
Patty, we were talking about willsand the couples that have young children.
You mentioned that they should have aguardian and the considerations and appointing a
guardian. They should have a trustand appoint trustees, and they should have
an executor. And what about thekids when when the money goes to the

(27:10):
children, what does that trust looklike? And what are some thoughts that
parents have in terms of making surethat the assets they leave those children are
protected. So when you pass,you can typically leave your beneficiaries your children
their money in one or two ways. The first ways you can give it
to them outright But the second andarguably the better way is you can leave

(27:33):
it in a trust for them.This trust is what we like to call
the beneficiary control trust, and ithas a lot of benefits because it's a
trust that you're creating for them,and you can't create a trust for yourself
that you know will protect yourself fromcreditors or you know, medicaid or divorce.
But you can do for others whatyou can't do for yourself. So

(27:56):
by leaving you know your beneficiary ship, by leaving them your assets in a
trust for their benefit, it's alot more powerful and a lot more effective
of just leaving it to them outright. Yeah, we refer to them as
the BCT, the beneficiary control trust. Layers love acronyms, but the distrust

(28:18):
for me as a parent gives mea lot of comfort that what I have
worked for in my lifetime. Andour clients every time we start talking about
this, their eyes light up.They'll kind of just be passive through a
good part of the conversation. Andthen you start talking about and you have
children, and what about your children? Are they married? Do you like
their spouses? What if you don'teven know who their spouses will be and

(28:42):
at some point in time, yourhard earned money is going to pass to
them. And what if it goesinto their accounts and then they get married
and they get divorced. What happensto your money that you left to your
children when they go through a divorce. And that gets the attention of most
parents. It did for me.And so having a beneficiary control trust allows

(29:07):
your child to control the trust.They can be their own trustee, but
it does not allow anyone to touchthat money accept them. So, Patty,
I think these are some of thebest things we can do for parents
as they're planning for their kids.I totally agree. So as we're looking
at legal documents and we're looking atwills and powers of attorney and healthcare proxies,

(29:30):
where does the money come from?If you have a young couple and
now they have children, and they'reworking one spouse, both spouses, they're
earning money, they're planning for collegeeducation. Doesn't life insurance have to be
part of that college education plan?Yeah? If they cannot afford to save

(29:51):
monthly to pay for it out right, you know, you need to make
sure that there is some kind ofother plan on. We always talk about
the premium that you pay for yourinsurance. You're leveraging your dollar. Right.
Where in the financial universe can yougive me a dollar and I give
you back six Right? Where doesthat happen? It doesn't happen. Right.

(30:14):
And when I say that, Idon't mean after forty years of market
growth, I mean tomorrow. Right. If you hand me a check for
your premium, I walk out thedoor, you pass away. Tomorrow,
We're going to pay your family whateverthat death benefit is. So you're really
leveraging your dollar. You're never evergoing to catch up in the market in
that timeframe. But we use terminsurance for those big expenses. Right,

(30:36):
You're not going to have to payfor your college education hopefully forever, right
when your kid's fifty. Hopefully you'renot worried about that. So that's part
of the IF insurance and in thatparticular timeframe, So when people are looking
at planning for college and planning fora lot of expenses. You buy your
home, you have a mortgage.You don't want that mortgage payment to go

(30:59):
unpaid, so you want to makesure you have a sum of money to
pay off the mortgage or at leasthelp you down the mortgage. We had
doctor Dean Scarlets on the show hereabout a month and a half ago,
and he is the College Advisor ofNew York, that's his business, and
we talked about the escalating cost ofcollege education and the costs are increasing ten
to twenty percent a year. Andright now locally right here Rpi skid More,

(31:25):
those schools are at ninety thousand dollarsa year, ninety thousand. In
another year or two, there'll besix figure per year investments. So you're
looking at a four hundred thousand dollarsbill for each of your children having had
three and paid for three years orthree college educations four years apiece. That

(31:49):
wasn't close to that much money whenthey went to college. It was a
lot. But now you're looking atone hundred it'll be one hundred and ten
hundred and twenty. And if yourkids are born today, do the math
and escalate those costs by ten percenta year. And this is a ridiculous
number. But when people are lookingat it at that stage, when they

(32:09):
have young kids, you mentioned terminsurance, What kind of amounts should they
be looking at? What kind ofpremiums can they expect to pay at you
know, a thirty year old couplewho has their first couple kids. What
and then should they be layering inthe when insurance as well? Of course,
because both will happen, right,both can happen at the same time

(32:34):
as far as cost goes, Soor what amounts you're looking for? Just
add up the liabilities, right,So picture yourself driving home from work,
and picture you don't make it home, right, that's realistic for all of
us every single day. And yourspouse, whether you have kids or you
don't, is left to pick upthe rest. Right. What are the
debts that you have? You wantto do you want them to pay off
the mortgage or are you going tomake them keep paying it? Do you

(32:57):
want to leave money for college?You know, for your child's call in
the future. Do you not whatother credit card debt do you have?
You know? What is it there? What about your income replacement? Right?
So your income has officially stopped.Add up those numbers, right,
that is the financial value that youbring to the home, right, So
what is that particular number? Andthen how long? Right? So how

(33:19):
long do we want that money tokeep coming in for? It's if you
make one hundred grand, your numbers, not one hundred grand, it's one
hundred grand times however many years youwant your spouse to continue to get that
right, so you could be lookingeasily over a million. A million and
a half of what you want toleave behind. Cost is not going to
be that much, so you know, assuming good health. Again, it
depends upon whether you smoke, drank, health, all those types of things.

(33:44):
You could be looking at anywhere fromI don't know, maybe seven hundred
and fifty bucks a year to twothousand, depending upon you know your health.
Which for me to give you backone and a half million in return,
that is a fantastic, fantastic toolto have. It's a lot of
leverage, it is. So thisis what goes hand in hand with the

(34:06):
legal planning that Patty was talking about, setting up the trust for the kids,
making sure that those insurance proceeds aregoing to be managed by either the
survivor or the kids. Certain amountof dollars to invest. I'm going to
put term insurance in place and thentalk a little bit about the other products.
We've already mentioned them. But howdoes a young couple get started with
a permanent insurance program? Yeah,so it's the exact same process right where

(34:29):
it is underwriting, so actually it'snot newer. But there are some policies
that have no medical exam, sopeople always get a little queasy with the
medical exam of blood and urine.So there's some that don't even have that,
so that exists. But again youhave to apply, right, So
especially if you have good health,get as much as you can afford.
You can always change your mind,right, you can always change your mind

(34:52):
in the future. But if yourhealth goes south, and I saw this
during COVID all the time, right, lots of people who let their policies
lapse or they're really worried about theirhealth. Everyone wants insurance. So to
place a case back during COVID,it took eight months to nine months just
for you to maybe get an answeron if you could get one. So
same process, you know, figureout how much you need. That's what

(35:14):
we do. We help people figureout how much they need, and then
the type and then depending upon yourhealth if you take medications, there's different
carriers in the state of New York, so you have to get a policy
through a carrier approved in your state, and then you just apply. If
you like the quote, you accept, you pay, and then you move
on from there. Pretty simple,So I want to We talked about term

(35:37):
insurance, which is what you neednow to fill a gap income replacement and
an ability to pay these large expensesthat you don't have time to save for,
and then insurance vehicles that can goside by side with that add death
benefit but also be able to accumulatevalue on a tax deferred multiply tax free

(36:00):
basis, which is the beauty ofthose. And there are some interesting products
out there, variable policies that havecertain guarantees. Yeah you want to,
can you mention those? Sure?So there's some depending upon Again, there's
lots of different carriers in the stateof New York National and certain features are

(36:20):
guaranteed. Obviously, your death benefitis guaranteed. It can never go below
that. There's some that have guaranteedfloors as far as like a dividend that's
paid that dividend usually they don't guaranteethem, but like mass Matoral hasn't missed
one in one hundred years. Sothere's different policies different carriers. Death benefits
guaranteed. Premium is also guaranteed,so a lot of people get worried about,

(36:42):
especially inflation, the cost of theirbills going up. Your premium is
guaranteed. Right. Again, youcan choose policies where it's not. You
don't want to do that, right, Those are usually cheaper up front.
There's usually a catch, right,you want to guarantee level premium level death
benefit where you know you know exactactlywhat's coming. So a term policy,

(37:02):
I don't want to build a bridgefrom term to perm The term policy is
just that you pay money, youget a death benefit. But many of
the policies have other features that arebuilt in. One of the features that
most people gravitate to is level termpremiums, which means that you're going to
pay the same premium as you said, guaranteed for a period of time.

(37:25):
What we see most often is twentyyears, but you could go ten years,
you could go thirty years. Itadds to the premium a little bit,
but it's a level certain premium forthat time period that you need the
coverage. So if your child isfive years old and you do a twenty
year level term, by the timethey're twenty five, tuition expenses should be

(37:45):
off the board. And that's whata lot of people do. But then
you get to the point where you'vehad that policy for nineteen years and all
of a sudden, you still needinsurance and your health may not be there
in nineteen years. And this isyou're looking at the guinea pig for this
conversation. Because I had a termpolicy, million dollar term policy that I

(38:07):
had purchased when I was thirty thirtyeight and at age fifty seven, unbeknownst
to me, and I thought Iwas in a picture of perfect health.
I had an issue going on thatwas devastating at the time, has resolved
nicely due to surgery, and thatwas a quintuple bypass surgery. So I

(38:29):
had open heart surgery at the ageof fifty seven, and I went back
and I first thing I did whenI was in the hospital and they said,
oh, you need open heart surgery, I said, damn, I
feel good. You know, whydo I what's going on? First thing
I did is I called my office. I said, bring me all my
life insurance policies because I really needto review all this and I need to
look at it. And I wasin year nineteen of a twenty year level

(38:52):
term with a conversion option. Sojust talk about that conversion option. How
important that is if you need it. Yeah, so all life insurance has
not made the same. That isnot the case. You know, you
see stuff on TV that can bereally cheap. You have to read the
fine print. So the conversion featuremeans, let's say that I bought my

(39:13):
term policy at twenty five. Inyour particular example, you were able to
take some of your term death benefitat fifty seven, and you were able
to convert that to whole life withoutevidence of insurance variable right, So variable
whole life without evidence of insurability.So what that means is that you were
able to lock in your health atthe time that you actually purchased the product,

(39:37):
versus having to reapply today at yourcurrent health, you would have been
declined. I was declined, yeahto the market, and I tried to
buy insurance and they just laughed.You probably would you had bypass surgery when
Yeah. So like for example,a DWY won't decline you. So a
lot of people forget right, We'vegot you know, lots of young people

(39:59):
making choice when they're young. DWIwill decline you on insurance. It's a
life choice that we don't think matters. It definitely matters. So yes,
the conversion feature. Again, notall policies are the same. I've seen
one where that feature was for twoyears. So it was a ten year
policy, but you could only convertit in the first two years. So

(40:20):
read the fine print of what youpurchased. You want to make sure that
that is for the life of theterm. Talking to two lawyers who get
who talk to clients all the time, and oh, I have an insurance
policy. Oh where is it?Oh I don't know. I bought it
twenty years ago. I don't knowwhere it is. And have you ever
read it? It's a contract.Yeah, these are contracts. Have you
ever read your contract? No,I've never read my Yeah, it's a

(40:40):
unilateral contract. Right, so onlyone person has to keep their end of
the deal, which is the insurancecompany. Right. You don't have to
You can change your mind at anypoint. But yeah, I mean,
not all term policies, not allinsurance products are made the same. And
so this is the time period,folks when most people undertake serious estate planning.

(41:02):
They want to look at their wills, powers of attorney, trust for
their kids, guardianship appointments, andthe financial side of things. How do
you put in place a liquidity,a fund that if you are not able
to do the things you need todo, that that money is going to
be there to take care of yourfamily, take care of your mortgage,
take care of college tuitions, andall the care and costs that your family

(41:24):
will have. We're going to flipthe switch and we're going to start talking
now about more evolution towards retirement.So you start with a young family,
and you blink your eyes in theirmature family, and your kids are not
five, they're thirty, and soat that point in time, you're in

(41:45):
your fifties, sixties, seventies,and now your thoughts are, okay,
if I retire, what happens ifI get Alzheimer's? What happens if I
have an act and I'm not ableto do all the things that i need
to do and I need help justambulating in my home and taking care of

(42:07):
myself. We call it long termcare. And unfortunately, the healthcare system
is not a healthcare system. It'sa sick care system. And if you
have a serious illness, it willtreat you and then spit you out and
say, Okay, go home andtake care of yourself, go to a
nursing home, go to an assistedliving facility, and then you're talking about

(42:30):
two hundred thousand, two hundred andfifty thousand dollars a year as the cost
of care for yourself. So howdo we prepare for that? How do
we do legal planning? And Patty'sgoing to help us with that, how
do we do the insurance planning?And what are the options available to us
today to cover that next risk thatwe're going to talk about the risk of

(42:52):
long term care. You're listening toLife Happens Radio. We're going to take
a short break. I'm Lupiro,your host for this morning. We will
be back right after this. Welcomeback. You're listening to Life Happens Radio,
and I'm Lupiro, your host fortoday. We're in studio with Patty
Wheelan and Chelsea Whiteman, and we'retalking about estate planning and using insurance products

(43:15):
as part of your estate plan.We've covered everything from sending your kids off
to college and getting a power ofattorney in a healthcare proxy, having children
and wanting to have insurance coverages andin a state plan that fit together,
and having guardianship provisions and trusts forminers and now we're going to kind of
evolve this conversation into long term care, and we're going to start with Chelsea

(43:39):
on the insurance side, because wetalk a lot on this show about long
term care and for years we've beenon the air, over twelve years about
long term care insurance. And whentwelve years ago, long term care insurance
was still a robust product, andthere was a robust market, but that
market has changed and Chelsea Life Insurancehas kind of picked up where long term

(44:00):
care insurance left off. What aresome of the options our listeners may have.
Yeah, so mostly hybrid products.If you think about a spectrum,
so on one side of the spectrum, it's straight and only long term care.
So it is you are traditional whatyour parents probably talked about. I
have two hundred dollars a day forthis facility. If I don't need long
term care, it's gone, right, there might be a small benefit,

(44:22):
but if I get hit by abus, it's gone, which is one
of the reasons so few people boughtit, correct because I could pay you
know, one hundred thousand a premiumover my lifetime and that goes away.
Yeah, it's gone. But withthese hybrids, your money doesn't disappear,
correct, So you kind of doboth. Right, there's those and then
there's the life insurance, which peopleare like, ah, I don't want

(44:44):
that. That's for That's not forme, that's for everybody else when I
die. So in the current marketenvironment is we put those two together in
a hybrid, so you have allor most of the features of both.
Right, So if you don't needlong term care, you have your traditional
death benefit. So if you aregreat, you live to one hundred,
you're still running marathons, and youdrop dead on your one hundredth marathon,

(45:07):
right, the policy is going topay out, so your family is going
to get your death benefit of whateverthat is. Yeah, however, let's
say that that didn't happen, right, and you need long term care.
So usually clients don't go from healthyto in a nursing home. You know,
from Monday to Friday. It's aspectrum, right, it's a spectrum.
It's a time change. When youcan't do your two ADLs activities of

(45:29):
daily life. Right, you enterthe long term care market, your policy
flips on, right, so youcan flip on your death benefit. So
think about your pool of money.The death benefit that you bought now becomes
a tax free pool of money forlong term care expenses. So again,
not all policies are made the same, but you can now use your death

(45:52):
benefit accelerate it to pay for longterm care expenses that you have. So
as you're pulling money out of thedeath benefit, that re deuce is the
death benefit, right, yep,you're using it during your lifetime, but
if you need it, that's theway. That's the way to do it.
And I know there are different kindsof benefits and different features, and
one of the most dramatic differences inour world because we help people get care,

(46:15):
find care, coordinate care, andpay for care. And when we
see a client come in with areimbursement contract, it's oh no, yeah,
yeah, Or an indemnity contract,it's oh, you've got it,
yep, it's covered. So talkabout the major difference between reimbursement, long
term care benefit and indemnity. Yeah. So for the reimbursement, that is

(46:37):
pretty self explanatory, right, Sowhatever the monthly maximum is. Let's say,
for example, your policy says yourmonthly maximum that we're going to give
you is five thousand dollars a month, but for that month, you only
spend three thousand dollars, what youhave to do. So a big thing
with reimbursement is they're only going toreimburse you for what you spent. If

(46:58):
you spent three thousand, they'll reimburseyou for three thousand. You also have
to provide receipts bills, right,you have to show that you actually paid
that money. And the third thingis to a licensed facility or a nurse,
right, so they have to havethe qualification. It has to be
what you actually paid and you haveto prove it. So that's the reimbursement

(47:19):
lot work. Yep, hopefully notfor me, but yeah, for the
indemnity it works really really different.Right, So same example, maximum for
the month is five thousand. Youcan get all five thousand no matter how
much you've spent. So let's sayyou spent three thousand dollars, you are
eligible to receive all five thousand,right, there's no limit on that.

(47:40):
The other thing is it does nothave to go to a license nurse or
facility. Again, like I said, usually it doesn't go from healthy to
nursing home. Let's pretend that youneed some care and you have to build
a ramp onto your home. Youcan use this to pay the contractor right
in a reimbursement and you cannot dothat contractor not gonna fly indemnity it is.

(48:04):
You can also pay family members forcare right so it's much more flexible.
There is no bills and no receiptsas well. So once you trigger
that to ADLs, you are goodto go and access your pool. So
if you're a good planner, you'regoing to have a policy of insurance in
place that's going to cover your longterm care costs and it's going to cover
your death benefit provide with liquidity andpatty. A lot of our clients come

(48:27):
to us without having long term careor life insurance with the writer or a
hybrid policy, and we have abouta minute left. What option do they
have to try to protect assets andwhat program is available to them? So
in the event that long term careis not available for them for whatever reason,
then we can do what's called aMedicaid Asset Protection Trust, which allows

(48:49):
them to protect their assets to becomeeligible for Medicaid. So Medicaid, why
would you need a trust to getMedicaid? Doesn't everybody get Medicaid? No?
Not necessarily because there's an asset andincome limit for Medicaid that you have
to you have to reach in orderto become eligible. Yeah, and Medicaid
Monday. I'm just going to giveanother plug for Medicaid Monday. Frank Hemming

(49:10):
and I and Aaron Connor have donethese for the last eighteen months. On
our website at purola dot com.You can find those thirty minute webinars on
Medicaid, on the Medicaid Trust,on Medicaid eligibility rules. It's a complex
program, but it's the only programthat is going to cover your home healthcare

(49:30):
or your nursing home care, andso Medicaid is very very important. Chelsea
Whiteman, thanks for being here today. You've been a great guest. And
how can people reach you? H? Yeah, So you can email me
Chelsea dot Whitman at Sitera Investors dotcom. You can also call me directly
five one eight two six one twotwo five two one more time. Yeah,

(49:51):
email Chelsea C. H. E. L. S. E.
A. Dot Whiteman at Sitera Investorsdot com or call me directly five one
eight two six one two two fivetwo Patty, how can people reach you?
You? Can call our firm oryou can also email me. And
that's five one eight four five ninetwenty one hundred and it's Pier o'connoran Strauss.

(50:14):
I'm Lou Piro. Thanks for joiningus today. We hope you enjoyed
today's show. Certainly learned a lot, and I hope you did too.
We'll be back again next week onLife Happens at WGY