Sheryl Nance-Nash

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Planning For Worst-Case Scenarios

A long-term care insurance policy provides income if you become dependent on someone else’s care or require assistance for basic living tasks.

You’ve likely heard the sobering statistic: About 70 percent of people 65 and older will need long-term care.

The price tag is just as frightening. Typical monthly costs on Long Island for an assisted living facility are $4,000; a semi-private room with nursing home care, $13,535; and for a private room with nursing care, $14,220, according to Genworth’s 2017 Cost of Care Survey.

So how do you pay for care? A long-term care insurance policy is one strategy. This provides income if you become dependent on someone else’s care or require assistance for basic living tasks and needs due to a chronic or prolonged illness, degenerative disease, or other condition that necessitates care at home or in an assisted living or long-term care facility.

Policies don’t come cheap, especially if you wait until your 50s or older to buy one. They can run a few thousand dollars a year.

“I continue to hear that long-term care insurance is expensive, but compared to what?” says Brett Anderson, president of St. Croix Advisors in Hudson, Wisconsin. “If you need ongoing care, you could easily spend $8,000, $10,000, $15,000 a month. I don’t see LTC insurance as expense, I see it as pre-paying in the event you need extended care, and you want to protect your loved ones and your assets by transferring some or all the risk to an insurance company.”

EXPLORE SELF-INSURANCE

The reality is, rising premiums are too expensive for middle-income Americans, says Lingke Wang, co-founder of Ovid Life in San Francisco. For many, self-insuring is their best solution.

What does that mean? You save enough to cover your own long-term care expenses. There are advantages.

“You have more choices,” says Matthew Rappaport, counsel with the law firm of Sahn Ward Coschignano in Uniondale. “You can go to a high-level facility or choose to pay a family member to administer care in any setting. Government-funded long-term care typically is more restrictive. I wouldn’t want to be left with only the choices Medicaid provides me.”

Secondarily, going through the insurance process spurs people to address related needs such as estate planning, financial planning, and retirement spending projections, he says.

One way to self-insure is with whole life insurance that builds usable cash values and has a long-term care rider.

“It’s often less expensive and a much richer and all-encompassing way to get the benefits of long-term care, along with a death benefit and the potential to build cash,” says Michele Lee Fine, financial representative with Guardian Life Insurance in Jericho.

STRATEGIES FOR SUCCESS

“Self-insuring is typically not done with accuracy or with any real ability to solve the equation,” says Lou Cannataro, partner, Cannataro Park Avenue Financial in Manhattan. “Quite often, it just seems to be the better alternative than spending significant dollars insuring against something that may not occur. Most do not realize the amount of money that can be lost to a long-term care need.”

His plan: “Build out your planning retirement model factoring in all of your goals and monetary needs through your life span,” he says.

If there is a shortage you cannot afford to self-insure. If your planning shows you can retire and not run out of money, you’re in good shape.

“Layer into this planning a long-term care need,” he adds. “If your goals are still accomplished even with the cash flow out for care, you can self-insure.”

WHAT’S A GOOD RULE OF THUMB?

“If you have at least $250,000 in current dollars to be inflated each year by 5 percent to spend on each occurrence of care in the future, plus all your other retirement assets to accomplish your goals, you can likely self-insure,” says Cannataro.

Have a written game plan for reducing debt. Free up income to invest in retirement and self-insure. Put in place an emergency fund of at least three to six months, a year if you’re older.

“Don’t put all your money in a retirement fund which is not accessible before you’re 59 1/2 and have no emergency fund,” says Kalen Omo, owner of Kalen Omo Financial Coaching in Tucson. “This could come back to haunt you if an unexpected event forces you to dip into retirement sooner than you would like to.”

Picture Perfect Planning for Art Inheritance

Inheriting art isn’t as simple as hanging a picture on the wall.

Inheriting art can feel like hitting the lottery. You have something of value you didn’t expect or work hard for. Depending on the piece, your net worth can jump significantly. It’s enough to get you excited for sure.

Settle down. No doubt, this is a good thing, a very good thing. But, know that while your treasure may have been “free,” that’s not to say there are no costs.

Here’s what you need to know about inheriting art.

FIND THE VALUE

“It is possible that the Picasso is a copy with no value at all,” says Jeffrey Greener, a trusts and estates partner at the law firm of Rivkin Radler in Uniondale. “There are many appraisers out there and each have different specialties, so doing due diligence is warranted.”

He recommends choosing an appraiser who is affiliated with at least one of the three major appraisal organizations: The Appraisers Association of America, the American Society of Appraisers or the International Society of Appraisers.

PROTECT YOUR ASSET

Once you know how much your gift is worth, look for insurance. Proof of purchase, invoice, and/or an appraisal are needed to find the insurable value, according to Rosemary Whisler, an insurance adviser with Cook Maran’s private client unit in Melville.

“Depending on the appraised value, it may be possible to include the piece under your homeowners’ insurance,” says Jeremy Larner, president of JKL Worldwide, a fine arts consultancy in New York City. “Alternately, you may want to insure your art under a special policy that covers a higher amount and takes into consideration things like breakage and movement of art.”

Also consider Art Title Protection Insurance, which protects against disputes that are related to ownership.

Considerations include determining how much coverage to buy (for example, the full value or some lesser amount), whether that coverage will be a fixed or “agreed value,” or whether you will be reimbursed at whatever current market value is at the time of the loss. Greener explains that an agreed value policy works well if the market value has fallen but not if it has increased.

Also, using an agreed value policy may also require you to have your artwork appraised from time to time to ensure that you remain fully covered. But be reasonable.

“Don’t overinsure for crazy values,” cautions Jonathan Greenstein, owner and operator of J Greenstein & Co., a Cedarhurst company specializing in Jewish art and antiques. “That will only add to your costs.”

Where should you turn for help?

“Always consult a reputable insurance broker with experience in the arena of fine art and one that has garnered relationships with the high-net-worth carriers, such as Chubb, AIG, and PURE,” says Whisler.

UNDERSTAND THE TAX IMPLICATIONS

Another reason you need an appraisal is for taxes. You need to establish the fair market value of the art as of the owner’s date of death because you, the heir, will receive a “stepped-up basis” in it.

“Essentially that means the built-in gain in the piece is wiped out and it’s as if you, the heir, purchased the art for the then-current value,” says estate planning attorney Nathan Jones of Nathan Jones Law in Missouri. “Later, if you sell the artwork, you can pay significantly less tax on any gain in value.”

Art that is appraised in excess of $50,000 could be subject to a review by the IRS Art Advisory Panel, points out Larner.

BE DILIGENT

Keep a file on works of art, especially those inherited. Are there receipts, gallery correspondence, or any family history related to that work of art?

“It is excellent practice to keep this information in a file, or directly attached to the back of the work,” says Graydon Sikes, director of artwork at Everything But The House, (ebth.com), an online estate sale marketplace. “This ‘provenance,’ or ownership history, is often critical to the value of a work. A collector always wishes to know any background information about an object.”

Proper storage and maintenance is a must. You want to preserve your loved one’s legacy and at some point, pay it forward.