Dr. Jay Zigmont, CFP®: Welcome to Childfree Life By Design. Today, we’re gonna get nerdy, super nerdy, about Childfree estate planning and long-term care planning. I’m Dr. Jay Zigmont. I’m gonna be your host just here solo today, and I’m gonna be pulling apart an article I did for financial planners on exactly how do you do long-term care planning, estate planning for Childfree people specifically.
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Dr. Jay Zigmont, CFP®: We’re gonna go to a level and a depth that we don’t normally go in these episodes. This article is written for a place called Kitces, [00:01:00] and we’ll link the article in the show notes. It’s about 6,000 words, it’s way long. So over the next half hour or so, I’m gonna try to bring you through it. But the reason it’s 6,000 words is that it goes into super specific details of how do you create a Childfree estate plan and long-term care plan, which is what we’re gonna do. Now, if you’re not a money geek and you’re not wanting to get all nerdy with me on it, that’s okay. This one’s gonna be kind of more technical. And if it doesn’t fit you, we’ve got other episodes that kind of go and have a little more fun with this. So let’s talk about estate planning and long-term care planning. My general goal with my Childfree clients is have a plan in place for long-term care by mid-40s that includes both how you’re gonna pay for long-term care and who’s gonna make decisions for you when you can’t. And the reason we have to do that is the system is busted for us. The entire estate planning and long-term care system [00:02:00] assumes that you have kids, and that you want them to make decisions for you, and that you trust them to make decisions for you. We don’t. The other assumption is there is that kids are going to take care of you as you get older. Just like any other assumption, that is not always true. So we look at this data, and we find that the US Census looked at adults over 55. It looked at what percentage get any financial support from their family. And in Childless adults, it was 2.5%. So that might as well be zero. But what was interesting is they looked at parents 55 and older, and they found only 1.5% of them got any financial support. So that’s a big problem across. Just being a parent it doesn’t automatically mean your kids are gonna take care of this for you. The difference is as a Childfree person, we know we have to do this. We know we have to have a plan. To the point I once had a client at 29 asking me, “How do I get long-term care insurance?” And it turns out you [00:03:00] can’t get it until 30. Most plans won’t even give you a quote until then. I explained that the other day to one of my financial planning colleagues, and they’re like, “They do what? He’s like, “I can’t get people to buy long-term care insurance ever.” And I’m like, “Well, I don’t sell long-term care insurance, but my clients want it.” Because what happens is the whole system falls apart when you don’t have a next of kin. You go to the hospital, let’s say you’re in that proverbial car crash, the bus hits you, whatever it is. And by the way, I apologize ’cause I’m going to, like, run people over with buses and kill people off in this episode because those are the examples I need. And you go to the hospital, you’re unconscious. But the question is, who makes decisions for you? So I was a paramedic for years, and I’ve had to make those decisions for patients. Because if I can’t find a next of kin to make decisions, as a healthcare provider, it’s my job to make those decisions with my best ability and my best understanding of what people would [00:04:00] want. But that doesn’t always mean that’s what they want. The system assumes you’re gonna walk into the hospital with somebody to make decisions for you. If you’re single and Childfree, you’re kind of out of luck. So we have to build a system to support you, because the way it works is if you don’t have an estate plan in place, and we did a survey on this, we found less than 20% of Childfree people had a will or any other document in place. If you don’t have that, you’re at the whims of the healthcare providers making decisions, or worse off, a court-appointed conservator or guardian making those decisions. Nobody wants that. The government has a standard estate plan. That standard estate plan says your next of kin makes the decisions for you when you can’t. The problem is, I get hit by that proverbial bus I was just out in San Fran last week. My family’s not around, can’t find anything, [00:05:00] the court’s gonna do it. So we have to build that. And what we find is for Childfree people, there’s kind of this what we call heir paralysis or agent anxiety of like, “Who the hell is gonna do this for me?” You get a couple options. One is, “Hey, I can find a friend or family to make this decision for me.” That works in some cases. I get a lot of folks that wanna do the Golden Girls setup. A whole bunch of old women… I don’t know why it’s always old women, it could be men, I am not making a judgment, watching out for each other. But what happens is there’s always gonna be a last person. Somebody’s gonna age out and be the last person. So it becomes a problem of, like, oh, somebody’s gonna be on their own. When it comes to family or friends, what we’re finding out is that 25% of people in the US have no family within five hours, or are disenfranchised from their family. The other thing we’ve heard is people saying, “Well, I’d like my family to make the decision.” I had somebody, great example of this is she was trying to work on a whole plan. She [00:06:00] actually wanted to be composted when she dies. Which, by the way, real cool. We’ll throw a leg in there, Recompose, there’s a great company out on the Northwest that does this composting. Super cool. But her family doesn’t believe in that. Her family believes in whole body funerals, burials. Well, are they gonna do what she wants or not? And the answer is probably not. Same goes with friends in the LGBTQ+ community, where the family may not have the same values. We need to make sure we have paperwork in place saying what we wanna do. And it’s particularly an issue if you’re single, Childfree, but you’re in a couple. If you’re not legally married, your spouse has no say whatsoever. So for my first book, The Portrait of Childfree Wealth®, I had somebody in there they had just gotten the paperwork done for their mother, and they were joking around that, “Oh, you’re gonna die by 50,” or something, and her husband died at 50. It’s one of those things, like, watch what you joke around. [00:07:00] The problem is, while she called him her husband, he was not legally her husband. When he went to the hospital, she was nobody, ’cause she had no paperwork. When he finally passed, she got nothing because it all went to his family, to the point where she ended up owning a home with her in-laws. And I’m not saying we’re all getting married. It’s a different question, okay? When people ask me, “Should I get married?” My first question, “Do you need healthcare?” The answer is no, well, we could probably skip it. But I need to get estate paperwork in place to do this. So we need to get estate paperwork includes your medical power of attorney, financial power of attorney, executor, and trustee. These are the people who make decisions for you both when you’re alive and you can’t make decisions, that’s your power of attorney, and after you pass, which is the executor and trustee roles. But we have to have that on paper, because if we don’t, we run into this system. And as we start looking at the risks on this, we also have to be mindful of who’s making these decisions. I’ll give you [00:08:00] another great example of this. I had a colleague who’s a healthcare advocate on the West Coast, was telling me this story. She has a client who, single, Childfree, again, appointed her niece to be her decision-maker, her medical power of attorney, financial power of attorney. Also executor. But the niece also gets everything in the will. Well, here’s what’s happening. The niece is canceling doctor’s appointments because it’s taking money away from the will. You would think that doesn’t happen, but it does. When that niece or whatever, I’m not picking on any one individual, has to make the choice of putting you in expensive long-term care or the cheap long-term care, you end up with a conflict. And what happens is the vast majority of trust documents are created to protect the beneficiaries, so this becomes a problem. A trust, by the way, you might have heard of, like, trust fund babies, all [00:09:00] that, is just a document that says, “Here’s what I want done for me and my stuff.” It also works together with a power of attorney. Power of attorney is while you’re alive. The medical power of attorney is medical decisions, financial is financial decisions. The trust is a bit of both, and the trust gives the trustee more power. But when you appoint a trustee, they have to balance the benefits of the beneficiary and the grantor, the grantor being the one who wrote the trust, the beneficiary being the one who gets it. Well, I don’t want that to be balanced. So when we were building Childfree Trust®, I spent way too much time with lawyers. Way too much. And there’s provisions in how you write a trust that matter. So I spoke with one, and happened to be an attorney that I worked with on quite a few things, and he said it this way. All trusts have a purpose.” The purpose for all the trusts he had ever written before mine was to protect the next generation. He’s like, “For a [00:10:00] Childfree person, that’s not what we want.” We want to make sure the trust specifies what money should be used for, when, and how, and that’s where we gotta get past just the basic standards. So there’s a standard called HEMS, H-E-M-S, which stands for health, education, maintenance, and support. That’s just the basic standard, like, “Hey, if I make this trust as a grantor, I want the HEMS standard to be the minimum.” But that really is the minimum. So this is like, “All right. Here’s what we call for maintenance and support.” Well, maintenance and support says, “I want what your life has been, I want that to be about the same as you go along.” I don’t want that. In my trust, I want them to spend every damn penny on my care or my wife’s care, and then whatever’s left over goes to my nephews. And that sounds simple, but that’s not the way these documents are written. So when we set up a Childfree Trust®, we actually set up a structure specific for Childfree people that says, [00:11:00] “My care comes first. If there’s a way to spend more money to take care of me better, do that.” Which sounds obvious, but as in that example of some of that niece or these trust documents at whole, that’s not what happens. You want to make sure it matches you. And you want to find that balance so that people understand what your priorities were. That’s what the trust document’s supposed to do. And by the way, that goes past a basic will. A will just gives your stuff to somebody. Your power of attorney document says like, “Do you want CPR or not?” in the medical example. The financial one says, “Okay, here’s the person who makes decisions.” You need to be filling in the blanks of to what level. And some of this is designed so that if you make a trust and its designed language says, “Okay, I want all this care, I want it all about me,” that it protects the trustee, because otherwise the trustee has to balance even the [00:12:00] concepts for you and the concepts for the beneficiary.
Dr. Jay Zigmont, CFP®: If you have an existing trust document, take a look at it. There’s a good chance it doesn’t include these provisions. The other thing I build into every Childfree Trust® is a pet trust. Turns out 76% technically of Childfree people when we did our last survey have pets. Well, how do we make sure your pet is cared for? That’s important. Remember I said that the state has a default one? Their default one is they appoint a court-appointed conservator guardian, which could take a couple weeks. If you’re in the hospital, you had a stroke, whatever it is, you’re unconscious, by the time they appoint a court-appointed conservator, unfortunately, your dog’s not going to make it. Just kind of how it works. The joke I always make, and then get in trouble for, which I will get in trouble when this airs, is that if my wife and I are in a car crash together and we’re sitting in the hospital together, she’s gonna be more worried about who’s letting Colt out [00:13:00] for dinner, our English mastiff, than how I’m doing. She always says that’s not the truth, and then anyone who listens to the podcast or talks to me or my wife knows the truth is Colt’s gotta get his dinner at 5:00. And by the way, he’s allergic to everything, and he’s special food and medicine and all this. That is all in our pet trust. When you set up a pet trust, you can actually leave money to take care of your pets. You can’t just leave your pet money. You can’t be like, “Okay, my dog gets everything,” ’cause the dog is not a person. Technically, from the court’s standpoint, the dog is no different than giving somebody your guitar. It’s just an item, and if they want to pawn it the next day or drop it on the street corner, they can. But with a pet trust, we’re setting up a structure so that a trustee is managing that and saying, “Okay, I know this person’s wishes. They want to make sure the animal’s taken care of. Here’s the money. Here’s who they say will take care of it.” [00:14:00] And then they have to essentially provide proof of life to get money. I’ll give you an example. Let’s say, okay, my neighbor’s gonna get my dog, and I’m gonna put aside $25,000 to care for him. By the way, $25,000 might sound like a lot, but that’s about the right number to start with for a pet trust. Our dog, him having some special needs and being a big dog, it’s a bit more than that. Instead of just writing a check to the neighbor for $25,000, the neighbor gets a dog, and now as they have bills, they have food bills, vet bills, whatever it may be, they get money because they have to prove, “Hey, I had this expense,” which is a way of proving that your animal’s taken care of. This is important. What we’ve also found is that pets are the number one reason why Childfree people will get their estate paperwork done. Just is. It’s one of those things. I was working with a couple recently. I’ve been working with them for years, trying to get them to get their estate paperwork done. They’re kind of moving along because nobody wants to do this. This is not like, “Yay, I get up in the morning, and I do my estate paperwork.” [00:15:00] And I’ve been kind of dragging them along, and they haven’t gotten there, and then I explain this stuff on the pet trust, and the wife smacks the husband and says, “We need to get this done tomorrow for our pug.” That is the reality. And then you need to make sure you have somebody to actually execute upon. So I already went through, like, you could have friends, you could have family, you got to watch out for that. What do you do if you don’t have people to do that? Well, you end up with a couple choices. If you’re in California or Arizona, you can appoint a professional fiduciary to make the decisions for you. It’s a great solution. California has one of the best systems. It’s the only licensure system for professional fiduciaries in the country. Downside is a couple things. One, you’re appointing one person. Two, they really only can work in that state. And three, it’s expensive. So I looked at this for one of my clients, and at the time, the quote was a minimum of $30,000 a year to be a professional [00:16:00] fiduciary. That’s expensive. Trust companies can also do these roles, but they only want to talk to you about if you have millions. That 10 to $30,000 minimum. They very rarely will do the medical component. The other thing to keep in mind, go with, like, a trust company, they’re fine to do that, if you can get them to do the medical part. But when your money runs out, you’re out of luck. So if you’re trying to die with zero, that might not be the best choice. Estate attorneys often will do the fiduciary parts of, like, the finance and the executor, kind of like the end of life stuff. Very rare do I find ones that will do the medical part, to the point where, like, I know one attorney in Georgia that does it, one in Massachusetts. They’re both full. I know a small group in Pennsylvania that does it, but there’s not a great answer for it in that system. That’s why we launched Childfree Trust® at the beginning of this year. Childfree Trust® is the first nationwide solution that helps you create your estate [00:17:00] documents, so you create your will, your power of attorneys, your trust. Then you appoint an independent trust company to be medical power of attorney, financial power of attorney, executor, trustee. Then you create what’s called care documents, which fills in all the blanks of, like, what do you want? What is your medical history? What are your pets’ allergies? All of that. And then provides 24/7 emergency response. If you’re a Childfree Trust® member, we charge $1,000 a year, $999 a year technically for that service, we become your in case of emergency. This was built specifically for Childfree people. My wife and I are the first clients. We did our documents. My wife is listed first on the documents, Childfree Trust® being the backup. The bonus there is now my wife can choose if she wants to make the decision for me or pass it off. And it’s not bad to pass it off. I’d rather my wife just be there to be my wife than be worrying about, who pays the bills. This is the type of support you can build around [00:18:00] you. And we have a 24/7 emergency call center, so when the hospital calls at 3:00 in the morning, we can fax over a copy of your medical power of attorney, fax over a copy of your medical information, start acting that role, and then go make sure your pet sitter is notified to let your dog out. We don’t literally let your dog out ourselves, but we call the people who do. So you have to build a care team around you. Because once you get the estate documents done, and if you have somebody to appoint that you trust, my answer is go to freewill.com, literally freewill.com, it’s free, and just get the paperwork done. If you don’t have somebody to appoint or you want a backup, that’s where Childfree Trust® comes in. But then once you do that, you have to build these care documents. If you’re doing it on your own, there’s a recommendation I always make called Knock Box, N-O-K-B-O-X. It’s literally a box that you can put all your information in, and whoever’s going to be your power of attorney or executor, trustee, has to know just [00:19:00] about everything about you. I will tell you, this is another area clients have issues. I looked at my documents, I looked at appointing my sister to make these decisions for me. I trust her. She would make perfectly fine decisions. Do I wanna tell her everything about me at all times? I don’t know. Do I wanna tell her all of my medicines and my medical history and dump this all on her, I don’t know. To the point where I’d rather have a professional do it. The bonus of professional is they’re unemotional. They’re just following a checklist. They’re fiduciaries. They’re required to do what you say. The flip side, some people go, “Well, I want somebody who knows me to do this.” Well, that’s why we make care documents for them to know you. And somebody say, “I want somebody to have an emotional investment in this.” Okay, that’s perfectly fine. That’s why you can always list other people or have them informed. But that emotional decision might be the issue. I’ll give you another example from my life. I mean, I might as well just [00:20:00] bare my whole soul on this thing. So my father and my mother have different ideas of how medicine works. My mother is one of those, like, pull the plug immediately. She wants no machines, nothing. When it’s her time, she’s out. My father, on the other side, wants all the machines, everything. Keep me on it for years. Well, here’s the thing. If he’s making the decision for her, out of love for her, he might not follow what she wants. He might think from his lens the answer is all the machines. That’s why I’m listed as their power of attorney. My sister can do it, too. We both know the gang The key is you have to make sure you have the documents, the care documents, and then that the person’s actually gonna execute it on the way you want. Now, I’ll tell you, a- and this is one of those things I was talking to my colleagues about, there’s a lot of inertia that says, “Don’t do these documents.” Turns out the number one reason why people get their estate paperwork done is either, [00:21:00] A, they have kids, or B, they buy a house. But if you’re Childfree and you rent, eh, it doesn’t feel like a pressure. I don’t care what age you are, if you don’t want the government making decisions for you, and I’m not being political at all in this, I’m just saying if you don’t want somebody who does not know you, court appointed, making a decision for you, go get your documents done. I was talking recently with somebody, and their answer was they put a Post-it note on their fridge so they saw it every time they went to their fridge that said, “Get your estate documents done.” And by the way, getting your estate documents done means getting them written, printed, signed, notarized. We send people to the UPS store to do that. That’s the best way to do it. You have to get it, and then you have to put it on file. You want it on file with your doctor, so they have a copy in, like, the Epic system, whatever it is. You want to put it in your phone who your emergency contact is. If you join Childfree Trust®, we send you a whole membership kit, cards to give out. Everybody needs to know who to contact. [00:22:00] The other thing you’re gonna do is you’re gonna take a copy of your paperwork, and this is gonna sound weird, so just go with me for a second. You’re gonna take a copy of the paperwork and either put it on the outside of your fridge or in your freezer. Okay? There’s different terms. You’ll see either file of life or vial of life. There are different initiatives. EMS professionals are taught to go look at your fridge or in your freezer for your documents. Because if you make the documents, they can’t find them, they’re pointless. And I’ll give you one last example of this and how important it is. I was a paramedic. I was taking care of this guy. He’s in his 70s, late stage cancer. He’s dying. And when I get there, he’s not breathing, no pulse. So the question is, do we do CPR and all of that other stuff? There’s six family members sitting around the bed, and they’re split. Half of them are like, “Yes, Dad wanted everything done.” The other half is like, “No, he wanted to go.” Somebody in the family says to me, Yeah, he did not want CPR, and he has a piece of paperwork around here somewhere to say [00:23:00] it. Until that piece of paperwork shows up, I as the paramedic had to make the choices. I had to start going to work and doing all this. And the unfortunate reality is, while you see in the movie people get CPR, the paddles come in, the old school, they zap them, and then the person comes back to life talking. That’s really not what happens. Especially somebody in this case. Well, in the end, one of the family members found the document. I was able to follow it. We didn’t have to do CPR, and I didn’t have to work on it. And I will tell you, half the family was mad at me because I didn’t do CPR, but I had his wishes in hand. That’s what you want. You want people to have your wishes written, in hand, and following them when you can’t.
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Dr. Jay Zigmont, CFP®: Ultimately, the goal of that estate plan and the goal of everything we do at Childfree Trust® is so that you can control the uncontrollable. At some point in your life, you will either be disabled and not be able to speak, or you will die. Hate to tell you, nobody gets out of this alive. So you need to have those documents so that you can have some control during those times when you otherwise can’t speak for yourself and are out of control. So That’s the first half of your long-term care plan. You have to have this estate in place. I will tell you, when I talk to financial planners about this, they don’t think about it always because they’re used to like, “Oh, well, I’ve got to put estate in place to pass the money to the next generation. I gotta do [00:25:00] generation skipping trust. I gotta do all this stuff.” That doesn’t fit us. And while I’m there, one of the other calls I said to the financial planners in this article is you have to watch out for generation skipping trusts. If your family has some decent money they’re passing down, there’s a good chance that their documents, their trusts, are what’s called generation skipping. So I’ll give you a great example of this. I had a client? the way it was set up was they would get the income from their parents’ inheritance, and then their kids would get the principal. Their kids would get the stock, they’d get the dividends type deal. Well, they’re Childfree. But their sister had a kid. Well, guess what? The sister’s kid is getting everything because those types of generation skipping trusts are designed to assume there’s a next generation. If your family has got a whole bunch of money and they’re passing it on, I want you to go see if there’s a generation skipping trust. And if at all possible, before anyone passes, can we get it changed? It’s a [00:26:00] nightmare if you have to go to court and convince people you’re never having kids. Because you would have to have the court rewrite a document that somebody, you know, your grandparent or whatever set up, and courts do not like that. So you need to get ahead of that, to the point where I’ve actually sat down with my client, their parents, their advisor, three financial advisors all in a room type deal, to get this in a place where we can get something that works for Childfree people. It’s just the entire system is assuming there’s a next of kin. It’s broken for Childfree. So you get your estate plan in place. You’ve got somebody to make decisions for you. The other question is, how do we actually pay for long-term care? And here’s how this is gonna go. The first thing I need you to remember is Medicare does not pay for long-term care. When you hear this number of, like, two fifty or three hundred thousand dollars you pay in your retirement for medical benefits, that is not long-term care. That’s just out of pocket [00:27:00] for Medicare co-pays and stuff like that. Long-term care is only paid by Medicaid when you’re broke. Medicaid, usually the maximum assets, something like three thousand dollars. You have to be down to your last penny before it will cover. Long-term care itself costs somewhere around $125,000 a year. Men will spend two point two years in care, women three point seven. And if you’re single, you’re actually gonna have a higher spend on long-term care because you don’t have a spouse. In the insurance world, and the data backs it up, the spouse takes care of the first set of care, which might just be, you know, helping with housekeeping or feeding or whatever else it is. When, as a single person, you’re gonna have to pay for that earlier on. So we have to have a plan for long-term care. Medicare is not it. Medicaid is not it, ’cause Medicaid also just got cut. So the benefits for Medicaid have been cut, and Medicaid care is not the [00:28:00] best. So Medicaid on average will pay, like, thirty cents on the dollar. So you’re getting super discounted care, which means reality-wise, it’s not the best. I remember my days as a medic, and you’d go into rooms where there’s four people to a room and that’s the Medicaid room and one of them, the alarm’s beeping ’cause they didn’t get to it. We used to always joke, but it’s true, you knew a Medicaid facility when you walked in and your feet stuck to the ground. I’m like, “Why are my feet sticking to the ground?” Don’t think too hard about that because what you’ll realize is that is nasty. Okay? It’s not what you want. So don’t be thinking about, hey, Medicaid’s gonna save this. And also if you’re in Washington or a few other states that are trying to do a state long-term care insurance policy, that’s not covering much. The Washington one, you gotta pay in for at least ten years. It’s an income tax, and then what they cover is one year of expenses, hundred dollars a day. It’s $36,000 and [00:29:00] change. Not enough. It’s not covering it. So here’s what happens. This is when people are like, “How the hell do I pay for this?” The way I explain it to financial planners and the way I explain it to my clients, same type of thing, where we’re gonna end up with three buckets. One bucket is I have less than half million dollars net worth. By the way, net worth in this case is everything you own minus everything you owe. That includes your house. If you have less than a half a million dollars net worth, you’re gonna end up on Medicaid. Just kind of how it works. You can’t afford to self-insure for long-term care, and you can’t afford long-term care insurance. Over time, your net worth might go up. You might move into the next bucket. But for now, the answer is, I just gotta plan on Medicaid. If you’re somewhere between half a million dollars and three million dollars net worth, that’s the sweet spot for long-term care insurance. And I’ll come back for how do we pick long-term care insurance, but that’s kind of like where it’s most affordable. Three million plus, you can probably [00:30:00] self-insure. Less than $500,000, Medicaid. 500 to three million, we got the insurance. Three million plus, you self-insure. And that’s today’s dollars. If you’re in your early 40s and you think you’ll get over that three million in the next few years, close enough. This is not exact math, but it gives you an idea of where do you start. For the folks less than half a million, we’re planning Medicaid. We may have to do, like, a reverse mortgage on your house. There’s a few tricks there, but there’s not much you can do on the planning side to do that. Let’s talk about the half million to three million. So the half million to three million is where I like to look at long-term care insurance, and I tend to try to find what’s called standalone long-term care insurance. There’s two carriers I tend to use most. It’s NGL and Mutual of Omaha. We’ve got a couple episodes talking about that. We’ve actually talked to the carriers. But you want coverage that’s kind of somewhere around, like, hey, it covers a $10,000 monthly benefit, 3% compound inflation rider, [00:31:00] and a three or four-year term. The cost of long-term care is going up by 5% each year, so ideally I’d like one that has a 5% compound inflation rider. But the reason I use the 3% is ’cause the 5% gets just so expensive. Super expensive real quick. So I really want something saying, “Okay, I cover $10,000 a month at 3% rider, three to four-year term.” If you’re in a couple, there’s what’s called shared care riders. I get my three years, my wife gets her three years, and then we share a bucket of three years. Or some are like, “I get three, you get three, we share those.” There’s a couple different ways of doing it, but something along those lines, which is good. They will also give discounts to couples. Now, interestingly enough, on long-term care insurance, you don’t have to be married to get that discount. Long-term couples will also get that discount. They don’t care, same sex, whatever, doesn’t matter, we’ll give it to you. But here’s the thing, long-term care insurance is most expensive for women. Just [00:32:00] is. Women will spend more time in long-term care. They will end up with a larger claim. Just how it works. If you can get a group long-term care plan, there are some employers that do that, awesome. Because they often have what they call unisex rates, where you like, men and women are paying the same rate. Awesome. And by the way, if you or your parents have one of the like, old school long-term care plans, I saw one, I didn’t believe it. It was unlimited coverage for unlimited years. I’m like, “Who in the world in insurance covered that?” That makes no sense, and these policies don’t exist anymore. If you have one of those old ones, you pay that bill, you never let it lapse, it’s probably a much better deal than what you get now on the mark. Now, if you’re looking at long-term care and the standalone insurance, I try to buy ones that are either a single pay, like you pay it all up front, or what’s called 10 pay, so you split over 10 payments, rather than annual. ‘Cause here’s what happens. Let’s say your annual premium is $4,000 a year. I don’t know, I just pulled that out randomly. All the policies are based on [00:33:00] your age again, your health and health of your parents, and I’ll come back to that in a minute. But we’ll link you to example policies. But let’s say it’s $4,000 a year. Well, that’s what it is today. They can’t raise your rates just ’cause of who you are, like your age or your sex or anything like that. But what they can do is they can go to the state and go, “Oh, we did the math wrong. We need to up the policy.” And that will happen sometime in your life. So that $4,000 policy, 20 years from now might be $6,000 a year. I don’t know. That’s like a random number it just goes up by. They’ll either increase the premium amount or lower the coverage, but that is very, very common. Well, if you do a single pay or a 10 pay, you can pay it all up front, and you’re good. It’s all done. They can’t raise the rates. They also can’t lower the coverage, ’cause you already paid it and locked it in. The other thing to remember is there’s state insurance agencies that say, “Yep,” even if the insurance company goes out of [00:34:00] business, the state insurance agency is gonna cover that. So you wanna go with a good insurer, you wanna go with a good history, but even if they fall apart, you got somebody else, ’cause they’ve locked in these terms. That’s the key in paying in advance. For standalone long-term care insurance, you have to actually qualify. And the qualification is based on both your health and the health of your parents. That’s why I want a plan in the mid-40s. If you’re listening to this in your mid-50s or 60s, sure, get it now, whenever you’re listening. Get up to your 70s, eh, there’s not great options. You’re probably not gonna qualify. So the way it works is if one of your parents has Alzheimer’s, dementia, Parkinson’s, cognitive decline in general, your rate for one parent having that is gonna go up probably about 50%, or your coverage is gonna go down. If both of your parents had Alzheimer’s, dementia, something like that, you’re uninsurable. Kinda how it works. You’re uninsurable from standard long-term [00:35:00] care standalone policy. If you have major amount health issues, same thing. So let me give you a couple examples. I had somebody and he went to get a long-term care policy, and he came back and he said he got denied. And I’m like, “You’re relatively young and healthy. What’s up?” And his answer was he had Lyme disease. Well, Lyme disease, it impacts your joints. Lyme disease, arthritis, autoimmune type stuff, yeah, chances are you’re not gonna qualify. So if you don’t qualify for standalone long-term care insurance, we can look at a long-term care annuity or a hybrid life and long-term care insurance. I’ll come back to the life hybrid in a minute. With the annuities, what you’re doing is you put aside a set as amount of money. Let’s say it’s $200,000. That $200,000 then, because it’s annuity, they’ll get you essentially double that in coverage. Not exact math, but go with it. So it’s a way to get your money working for you for long-term care. There are very few annuities I recommend, where we’re looking for ones where we know the [00:36:00] fees, we understand the system, and the benefits matter. So for example, there’s an annuity I do like with my clients. It’s a fixed index annuity. You get a certain amount of money each year or each month, depending on how you wanna take the checks. Then with your long-term care, you get to double that amount for five years. Love that. It’s a way to truly die with zero. You take that annuity, you combine it with Childfree Trust®, you’re done. You’ve got a money coming in each month. It goes up by a cost of living adjustment, and you have a long-term care. It works. Problem with annuities is there’s fees built in there, and you’ve gotta be aware of what’s going on. If you’re gonna go down that annuity route, you’re gonna go down getting insurance, I still encourage you to work with a certified financial planner who understands the Childfree market and go, “Okay, help me understand this because my insurance agent is selling me stuff they get a commission on.” And I’m not saying the commission always shades them, but it is a factor you need to be thinking about. You need somebody do the math, ’cause sometimes there’s better ways to do it. The other option is what’s called a life insurance [00:37:00] policy with a long-term care rider. Here’s the thing. Life insurance itself has little to no value, particularly if you’re single and Childfree. For a couple of Childfree, there may be some cases where it matches, but long-term care is really important. Life insurance, not so much. So when you’re buying a life insurance policy with a long-term care rider, we’re essentially saying the life insurance component has zero value or very near there. The long-term care insurance is where all the value is. Well, the bonus is you can actually buy life insurance. You can pay one payment upfront with a good long-term care rider, and it might be cheaper than standalone long-term care insurance. So essentially, you get the life insurance for free. It works, and often the working through the medical issues there, a little less stringent. It’s not always cheaper, but it can be, so you wanna look at that. But you have to find a balance. You will see, like, whole insurance, hybrid life insurance, others with riders. The thing is that [00:38:00] long-term care benefit needs to be where most of the money’s coming out, not on the life insurance side. Let’s say we have 3 million or more, or we are in that two and a half to three, and we don’t like long-term care insurance. One of the things I often get from my clients is, “What happens if I buy long-term care insurance and I never use it?” My answer is, “Then you won the game.” About a third of people will die in their sleep, never need long-term care, and if that’s you, be happy. I would love for that to be the case for me. And if I bought insurance and I don’t use it, that’s okay. It’s kind of like asking me, like, “What happens if I buy homeowner’s insurance and my house doesn’t burn down?” You’re happy about that. Often it’s actually cheaper to buy long-term care insurance than self-insure. When I look at self-insuring, that means you’re going to pay for it yourself. You’re taking on the risk yourself. My rough number, is about a half million dollars set aside for this. Now, if you meet with us, if you go to childfreewealth.com, you can actually get a checkup, and we’ll go through our whole thing, and we can [00:39:00] get the number a bit closer for you because, you know, you might be able to put a little less if you’re younger, a little more if you’re older. But go with a half million dollars is a rough number. You take that half million dollars, you set it aside, you invest it. It has to beat five percent return because it’s got to beat where the market’s going. And that’s purely for long-term care. That is not retirement money. It’s got to sit there and do nothing but grow for long-term care. If you’ve got over three million dollars, you can set aside a half a million dollars, have it over there, be self-insured, and you’re in a good place. And here’s what happens. What’s weird about this, and this is what kind of messes with people’s brains, is if you’re gonna set aside half a million for long-term care, it’s the same number if you’re single or a couple. And at face value, that doesn’t make any sense. But what really happens is, as a single person, you’re gonna have to pay for care earlier. I mentioned that earlier. It’s just the small things [00:40:00] that happen. It’s part of that overall, what we call single tax. Not really a tax, it’s just kind of a way of looking at it, but it costs you somewhere between four hundred thousand dollars and a million dollars of extra across your lifetime to live a single life. Well, the same goes with long-term care insurance. It’s gonna cost you extra to self-insure. So we set aside half a million dollars, we’re done. If you’re in that five hundred to three million and you want to do self-insurance, fine. But let me give you a real-life example. I had a couple, they’re mid-forties male-female couple, and they went and got a policy, and it was gonna be about, I think it was like two twenty-five or something like that to buy the policy. Well, they paid the two twenty-five upfront, got the policy in place, and didn’t have to set aside half a million dollars. Sometimes it’s cheaper to insure. I actually think most of the times I’ve done it, unless you have a medical issue, it’s cheaper to insure. This is one of those where I want to pass that risk off to others. So a couple things. I’m gonna kind of bring this all together. [00:41:00] The answer is, as a Childfree person, you need to have a plan in place for your long term care. My ideal answer is before your mid-40s, and if you’re not done by then, you must have a long term care plan in place before you retire. That includes how you pay for it and who makes decisions for you when you can’t. If you can’t afford the insurance or self-insure, you still need the estate plan. Childfree Trust®, that’s a service I own and, developing for the last four or five years. One of the things we do there is we make a promise that we’re never gonna raise our price by more than Social Security cost-of-living adjustment, so you can afford it now, you can afford it in the future. And the other promise we make is if you end up on Medicaid and broke and out of assets, we’re just not gonna bill you. It’s a true die with zero safety net of you have somebody to make your choices for you. You need that estate plan. It’s an absolute must. If you’re listening to this and you’re 32, you still need that estate plan. You need to appoint somebody to [00:42:00] make decisions so that the court doesn’t do it for you. You can go to freewill.com, just get the paperwork done. You can go to childfreetrust.com if you don’t have somebody to appoint or you want some backup. But it’s an absolute must, and you really can get it done in a weekend. Don’t worry about getting it done right or perfect. So I had a client the other day that I asked them why they’re not getting their paperwork done. It’s driving me crazy. And their answer was, they move all the time, so they don’t know where to bury themselves. It’s a great question. Put an answer down, I don’t care where, and you can always update estate plans later. You really should be updating them every five years anyway, so don’t worry about getting it perfect the first time. Once you have that paperwork in place and you have somebody to make decisions for you, then we got to go on to how do we pay for it? And I’ll tell you right now, if you’re one of those people out there going, “Well, I’m hoping the government fixes this,” it is going in the wrong direction. I do not trust that the government’s gonna fix this. Social Security’s running out of money. Medicaid is the single largest line item for most [00:43:00] states. Medicare is really expensive. Even if they did Medicare for All, that would not cover long-term care. So you need to have a plan for it. As somebody was saying this to me, you know, “Well, I don’t have to pay for diapers, but I have to pay for long-term care.” If that’s what works for you, awesome. Then we have to build the care team around you and the structures and the systems to go with it. We’re always happy to help. If we can help, go to childfreewealth.com to get a checkup. We can work through the exact numbers for you. Go to childfreetrust.com. You can actually get your estate paperwork done. Get covered and be in a good place. We’re gonna leave you a link to the Kitces article so that you can actually go in and make a deliberate design around your long-term care plan. Please, if you do nothing else, at least get the estate paperwork in place, ’cause that’s something you can do in a weekend.
Outro: From Childfree Insights, this is Childfree Life By Design, the go-to resource for building the Childfree life you want. Every episode gives you practical guidance, clear direction, and meaningful conversations to help you live [00:44:00] intentionally and design a future on your terms. This podcast is for educational and entertainment purposes only. Please consult your advisor before implementing any ideas heard on this podcast.
