I read a great article in the Wall Street Journal today which stated that affluent investors put their heirs at the bottom of the priority list (a paltry 41% rank this as important) when ranking their financial concerns (Counting on an Inheritance? Count Again. - Wall Street Journal, Monday June 11, 2012, page R1). The first....rising health-care costs at a whopping 79%. This leads to a problem that I have recently seen, where children are paying for their parents' care.
I know that there is something noble about taking care of your parents. After all, they (presumably) took care of you...gave you shelter and kept you healthy...maybe helped you with money when you needed it...maybe even paid for your college education. There's nothing ignoble about planning for yourself, however. It's what they'd want for you anyway. While you're at it, ask them some questions now while they're in good health.
Clients sometimes tell me, "I need to save for my child's college, but I have nothing saved for myself." Here is the kicker....you can't borrow to save for retirement. As much as you may hate it, you could borrow for your child's college education. Think about it. Throw in your parent's health care bills and now you have a financial disaster cocktail. You have to plan for these things!
Pay thyself first - Save for yourself before you do anything else. I had to see this in reality before I believed it. I had a period in my life where I was saddled with a tremendous amount of debt, and I was afraid to save anything for myself. But my financial planner convinced me that saving for myself was paramount....the debt would disappear if I had a disciplined plan for it. And darn it, he was right!
For those of you in your 30's, ask your parents if they have long term care insurance. It's not too late for them, if they're in the state of health that would allow them to be under-written (I don't know insurance law so ASK ABOUT IT). Think about how little those monthly/annual premiums are in comparison to a year-long stay in a nursing facility, to say nothing of the peace of mind. This is something I wish I had done 10 years ago, when someone mentioned it to me. I'm sad to say I didn't.
The tax deductions for long term care insurance premiums aren't large, folks. They're generally limited (in the cases of individuals) to anywhere from $350-$4,370 per taxpayer depending on your age. For example, if you're below 40, your deduction is limited to $350/taxpayer. The deductions go up as you get older. You add them to your other medical expenses and if they exceed 7.5% of your AGI (10% of your AGI in 2013, generally, since the health care law is going to stand for now), you can deduct them.
For my self-employed clients....the tax deduction for long term care premiums is a little more attractive. It's too complicated for a blog, but I'd love to help you run the numbers and see if you're eligible for a bigger tax deduction.
Bottom line....tax deduction or not....it's a good idea to at least talk about this.
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