Dear Liz: You had an interesting column recently about the filial responsibility laws that most states have on their books requiring adult children to support indigent parents. I have friends that transferred their parents’ funds to the grandchildren so the parents will qualify for Medicaid. Doesn’t the government see through this scam? Besides being unethical, it should be illegal.
Answer: The government does indeed see through transparent attempts to artificially impoverish older people to qualify for Medicaid, which offers nursing home care for the indigent.
Medicaid has “look back” rules that examine asset transfers made within the previous five years. Transfers made during that period can delay the older person’s eligibility for the program. In other words, your friends’ maneuvers may well backfire. You should advise them to consult an elder law attorney. Referrals are available from the National Academy of Elder Law Attorneys at http://www.naela.org.
Dear Liz: In your answer about filial responsibility, your statement that the letter writer’s financial situation is the result of her own choices and that she needs to stop blaming her parents is completely misjudged and inappropriate. Clearly, the writer is not blaming the parents and seems amazingly strong and clear thinking for one with her early background.
Answer: Here’s what the writer wrote about her situation:
“I am an only child in my late 30s and received no financial help from [my mother] from the age of 18. In addition, my father died when I was very young, leaving us fairly destitute with no life insurance. I feel that both of these legacies have contributed to my less-than-optimal financial situation.”
The writer goes on to say that she’s trying to catch up financially but she feels it would be futile because she may have to support her mother in the future.
The writer started her adult life at a financial disadvantage compared with people whose parents helped them pay for college. She may now regret the choices she made — perhaps she took on too much student loan debt or spent more than she earned to make up for early deprivation. Those were her choices, however, and at some point she needs to take responsibility for them. Twenty years later, it’s time to let go of the idea that her financial situation is her parents’ fault.
In a way, what he said was kind of flattering. He obviously thought his wife would have no trouble finding his replacement.
The reality, though, is that middle-aged women with kids aren’t often a hot commodity on the dating market. And even if she were the suburban version of Angelina Jolie, the underlying message was disturbing. He was putting his wife in the position of having to remarry for money. If she couldn’t find someone suitable, she’d face a lifetime of reduced financial circumstances.
That’s a hell of a legacy to leave behind, particularly when term life insurance is so cheap and easy for most people to buy.
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A few weeks ago I asked my Facebook followers if they had enough life insurance and, if not, what was preventing them from getting more.
Only two people mentioned cost. Many of the rest weren’t sure how much they needed or where they could turn for objective, unbiased help. A few were pretty confident they had enough insurance…although in reality they may have needed more.
The two most important questions to ask about life insurance are, “Do I need it? And if so, how much do I need?” The answers to those questions trump all other considerations—regardless of what your friendly insurance agent might be trying to sell you.
Here’s what you need to know:
If you have financial dependents, you need life insurance. Minor children are financial dependents. So is a spouse or partner who needs your income to pay the mortgage. Stay-at-home parents need coverage, too, since a surviving parent would likely have to hire childcare help. Some people have elderly parents who rely on them for income or caregiving or both; those people need coverage as well.
If you need life insurance, you probably need a lot. As in five to 10 times your income. The amount will vary according to your earnings, your savings and estimated future expenses, so it’s worth taking the time to get a more personalized estimate. MSN has a life insurance needs calculator here. Bankrate has one here.
Social Security survivors benefits probably won’t be enough. Social Security can provide checks to your survivors, but they won’t replace your income and they have limits. Social Security survivor benefits end at 18 or 19 for the child, while parental benefits (the check a surviving parent gets for caring for a covered child) end when child is 16. Widow’s or widower’s benefits typically don’t start until age 60. You can see what your estimated survivor benefits are at http://www.ssa.gov/estimator/
Insurance you buy through work usually isn’t portable. Many employers provide a life insurance benefit equal to your annual salary, and some allow you to buy more coverage. This may be the most economical way to buy life insurance if you have health issues or other risk factors, but the big downside is that the policy is tied to the job. Lose your job, lose your coverage. If you can, it often makes sense to buy at least some coverage independently.
Permanent insurance is for permanent needs, which most people don’t have. Term insurance covers you for a certain time period, usually 10, 20 or 30 years. Permanent insurance is meant to provide you coverage for life. Insurance agents love to sell permanent insurance, which often has some pretty cool features. The problem is that the premiums can be 10 times what an equivalent amount of term insurance costs. Remember, if you need life insurance, you need to get enough life insurance. Settling for too little coverage could leave your family in a real hole. If you do have a permanent need for insurance—you have a special needs child or an estate-planning issue that requires it—talk to a fee-only financial planner about your options. Otherwise, shop for term insurance at places like Accuquote or Insure.com.
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Thanksgiving is so late this year that I’ve been drifting along in a lovely bubble of denial. Even my Jewish friends’ preparations for Hanukkah haven’t been enough to alert me that Christmas isn’t far off.
Today a TV crew from a local Chinese-language stopped by to record some tips for enjoying the holidays without creating debt. The key, I said, is planning. So now’s the time to take my own advice.
Holiday season is a busy and expensive time, one that for us includes entertaining, travel, several family birthdays and a bucketload of presents. So here’s what I’ll be doing this weekend to prepare:
Finishing the spreadsheet. I use an Excel spreadsheet to list who will be getting presents and a target spending amount for each person. The spreadsheet also includes an estimate of what we’ll spend on travel (airfare, hotel, gas, food), entertaining (drinks, food, centerpieces), decorations (tree and lights) and holiday tips for the people who make our lives easier (cleaning lady, gardeners, hair stylist and so on). I total everything up, gasp, and start making adjustments so that our spending won’t leave us with huge bills in January.
Going on a treasure hunt. I buy gifts throughout the year and stash them in convenient hidey-holes throughout the house. I’ll dig them out and add them in the appropriate cells on the spreadsheet so I don’t wind up buying duplicate gifts.
Cashing in. I’m not a huge fan of gift cards as gifts, but I love using them to buy real gifts. I also have a rewards credit card program that allows me to use points to get Visa gift cards that, again, can be used to buy gifts or given in lieu of cash as a holiday tip. My daughter and I will also take our coin jar down to the nearest Coinstar to get a fee-free Amazon.com gift card. (Coinstar also offers gift certificates to iTunes, Starbucks and a bunch of other retailers.)
Stocking up. I like to take advantage of holiday sales to buy an extra turkey (to freeze and use later), stock up on baking supplies and lay in a fresh supply of crackers, dips and other nibblies for drop-in guests. This is also a great time of year to double dinner recipes and freeze half for those days that are just too frantic to cook.
I plan to finish this weekend in much better shape for the holidays. How about you? What needs to get done now for you to be ready?
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