By Michael P. Rapps

How would you and your family live if you were unable to work? Sixty-two percent of Americans have life insurance, yet they are four times more likely to become disabled than to die in any given year. Most wage earners estimate they have only a 2% chance of being disabled for three months or more, while the actual probability is closer to 25%. The following story about the Schneider family is a vivid illustration of the risks of inadequate disability insurance and the unfortunate new reality for many.

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Mr. and Mrs. Schneider are both 65. Mr. Schneider has a stroke, but as his wife is still energetic and healthy and they have limited disability insurance, they decide that he can recuperate at home. Jenny, his cheerful home aide, visits him for three hours a day. Like three-quarters of home-care patients, he needs skilled care, the highest level of in-home care. Similar to the average home-care patient, he requires her services for almost a year, which ends up costing them $19,500.

By the end of the year, Mrs. Schneider’s health has declined, which is typical for unpaid caregivers. So when Mr. Schneider suffers a second stroke, she’s forced to put him in a nursing home. She feels extremely guilty about it and compensates by opting for a private room, which costs her $91,000 for the year. However, Mr. Schneider’s business is floundering due to his absence, so she reluctantly moves him to a semi-private room, which saves her $10,000 annually.

Mr. Schneider’s health improves after intensive therapy, but he can’t manage the commute to Manhattan and no longer has the mental sharpness to manage the operations. His key-person insurance covers death but not disability. His major rival smells blood and Mr. Schneider is forced to sell for $2 million less than his company is worth. He’s always prided himself on being a good provider and felt secure knowing his life-insurance policy would afford Mrs. Schneider a very comfortable old age. He’s sad and depressed to see his wife struggling.

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Disability Defined

Many of us think of disability as the result of an accident, but back injuries, stroke, cancer, dementia, heart disease, and other illnesses cause the majority of long-term absences.

Disability by Age and Stage. It can be tempting to put off acquiring disability coverage until you’re much older. Surprisingly, however, more than half of Americans classified as disabled in the 2010 census were in their working years, ages 18 to 64.

Don’t Forget about Alzheimer’s. Every minute, someone in the United States age 65 and older develops Alzheimer’s disease. Every Alzheimer’s patient has an average of two friends or family members providing them with unpaid care. Unfortunately, their spouses have a far greater risk of dying themselves.

The Solution:
Long-Term-Care Insurance

We’ve seen how critical it is to acquire adequate coverage to protect, you, your family, and your assets.

  • Most long-term-care insurance plans allow you to choose the amount of coverage, and how and where to use your benefits.
  • The variety of settings can include your home, assisted-living facilities, adult daycare centers, and hospice facilities.
  • A comprehensive plan can cover all levels of care.

Avoiding The Risks
Of Insufficient Insurance

Unfortunately, many older Americans will either be medically ineligible for long-term-care insurance or unable to afford the premiums. Therefore, more aggressive planning should be considered as early as possible to ensure that savings and investments are not depleted by a patient’s having to pay out of pocket for care. An elder-law attorney with experience in estate and asset-protection planning can create a plan to provide you with peace of mind.

The Essential Expertise

When a person becomes disabled, he or she is often unable to make personal and financial decisions. At a minimum, one needs to grant broad powers of attorney allowing agents to handle your property, and appoint a decision-maker for healthcare matters. Alternatively, a fully funded revocable trust can be established. Advance planning ensures that the family will avoid being forced to apply to the court for appointment of a guardian over the person or property, or both. Those who remember the public guardianship proceedings for Groucho Marx will concur that it can become a nightmare.

It’s optimal to work with a team of professional advisors–legal, tax, medical, and financial–to ensure that planning encompasses your unique goals and objectives and addresses all aspects of a potential disability. Our firm is dedicated to ensuring that all your concerns are addressed and to protecting your livelihood, lifestyle, and legacy in all circumstances. v

Michael P. Rapps is the managing attorney at Rapps & Associates, PLLC, located in Woodmere. His practice focuses on estate, asset-protection, and business-succession planning. He can be reached at mrapps@rappslaw.com or 516-342-3756.

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