How to Create a Financial Safety Net: Prepare for Life's Unwelcome Surprises Part II

Following are more tips on how to create a safety net that can help protect you financially from the challenges you may face one day.

To view Part I please click here.

Plan for the possibility that you may need long-term care.
Long-term care (LTC) is the type of care you may need if you ever need help with basic activities of daily living, such as eating, bathing, and dressing, due to an illness, injury, or cognitive impairment, such as Alzheimer's disease.

While we all hope that we will never need LTC services, it is important to plan for the possibility that we may because:

• More than two-thirds of people turning age 65 will need long-term care services at some point in their lives.
• LTC services are generally not covered by Medicare.
• They can be expensive.

How expensive? LTC costs vary dramatically from one part of the country to another. To get an approximate idea of the cost of LTC services in your area, visit the website, Then wind your way through the site to the Costs of Care in Your State page and click on your state to get an estimate of the cost of services in your area in various settings (your home, adult day care centers, assisted living facilities, and nursing homes).

If it turns out that you are one of the people who will one day need LTC services, how will you pay for them? Here are a few options.

If you are a veteran, the U.S. Department of Veteran Affairs may provide LTC services in certain situations.

If your income and assets are extremely limited, you may be eligible for Medicaid, a government program that pays for some LTC services.

If you have substantial retirement income, savings, and assets, you may be able to comfortably pay LTC expenses without threatening your future financial security and that of your family.

If you are concerned that your income and savings may not be sufficient to cover a long period of LTC services without pre­ maturely draining your savings, consider purchasing LTC insurance to supplement the amount you can afford to pay.

LTC insurance can help you cover the cost of LTC services that you receive at home or in a nursing home, assisted living facility, or adult day care center.

LTC insurance policies differ, but you will generally have a choice of the maxi­ mum amount the policy will pay per day, how long the benefits will be paid, how long you must pay for LTC services out of your own pocket before benefits begin, and whether the benefit amount will be adjusted annually for inflation. The choices you make will influence not only your potential benefits, but how much you will pay in premiums for the policy.

Talk to your financial advisor about how to plan for long-term care costs and whether LTC insurance is appropriate for you.

Choose someone to handle your finances if you are unable to do so.
There may come a time in your life when you are not able to manage your own finances. That time may sneak up on you, as is often the case with Alzheimer’s disease, or it may happen in the blink of an eye, as the result of a serious accident. It may last for a few days, or it may linger on for many years.

Because you never know if and when you may experience such a time, it is important to make arrangements now for someone you trust to manage your finances in the event you are ever unable to do so yourself.

Using a legal document known as a durable power of attorney for finances, you can grant a person you trust the power to handle your financial affairs if you become incapacitated.

Not to be confused with a non-durable power of attorney that becomes invalid upon incapacitation, a durable power of attorney remains in effect after incapacitation so that the person you name can immediately step in and begin paying your bills, managing your investments, filing your tax returns, and any of the other financial tasks you authorize in the document.
Even married couples need durable powers of attorney. Although your spouse has some authority over property you own jointly, that authority is often limited. For example, while your spouse can pay bills from a joint checking account, he or she may not be able to sell jointly owned property. And if you own property in your name only, your spouse cannot manage or sell it.
If you become incapacitated without having a durable power of attorney in place, your spouse or other close relative may need to ask the court to appoint someone to handle your financial affairs.
Wouldn't you rather make that choice yourself?

Use life insurance to strengthen your family's financial safety net.
If your spouse, children, or other loved ones count on your income, consider adding life insurance to your financial safety net to help them maintain their financial security after you are gone.

In the event of your death, life insurance pays cash to your beneficiaries that can help them in many ways.

The cash can help your family cover their daily living expenses and maintain their current lifestyle.
• It can help with larger expenses, such as paying off the mortgage or other large debts.
• It can help pay your children’s college tuition so that they can afford the education you envisioned for them.
• It can help support your spouse or parents in retirement.

Life insurance has the potential to help in so many ways, not the least of which is easing your mind about your family’s future financial security.

There are a few different types of life insurance available, each designed to help meet specific needs.

Term life insurance may be a good choice if your goal is to purchase coverage for just those years when you are raising a family or paying a mortgage.

A whole life or universal life insurance policy may be a good choice if you prefer a policy that provides lifelong coverage and builds a cash value that you can draw on if you need some cash for, say, retirement or emergencies.

Your financial advisor can help you determine whether life insurance should be part of your financial safety net. If it is an appropriate addition, your advisor can also help you determine the best type of policy for your situation and financial goals, as well as the amount of coverage you may need to help meet those goals.

With offices in Williston and Rutland Vermont, Copper Leaf Financial Advisers take a holistic approach to your financial well-being so call us today at (802) 878-2731 to schedule a strategy session.