The Middle Class Is Broke Because Estate Planning Is Broken
How The Rich Do Long-Term Care
Spoke with a smart person last week. She works for a gigantic financial services company. You know the name. The company is excellent. She is excellent. Her team’s job is to look out for about 150 families. “Wealth Management.” They are good at it. Her families do not go broke.
I was curious… “How do you deal with long term care?”
“A cornerstone of our work, of course. You cannot ignore it.” She said.
“But how do you do it?” I persisted.
I was disappointed in her reply. She talked about “asset allocation.” Used the same words and phrases I had heard from other financial professionals. Stuff I have seen fail over and over again. Very disappointing. Burst my bubble. No insight here. And she had seemed so perceptive. But it was the same old, same old. Recycled stuff. Your own financial advisor gave you the same advice. Put so much over here, so much over there. Et cetera.
“That’s all well and good,” I said, “But don’t your folks go broke?”
She laughed. “No, never.”
“Never? I find that hard to believe. Long-term care is expensive.”
“Yes, it is,” she agreed. “But fifty million dollars is quite a bit of money.”
Demonstrating my keen intelligence, I replied, “Huh?”
“Well, our minimum is fifty million of investable assets…”
And then the lightbulb moment…
How the rich do long-term care. From their (minimum) fifty million, their team of professional investors allocates a few million to long-term care issues. Problem solved. For them. Unfortunately, that is what your financial advisor is doing for you. That is why your family faces nursing home poverty.
We Are Not The Rich. Their Solutions Do Not Work For Us
Let me tell you about the very rich. They are different from you and me. [U]nless you were born rich, it is very difficult to understand.
—F. Scott Fitzgerald
Why aren’t your advisors looking out for you? Why all the parrot talk about asset allocation, hybrid insurance products, investment strategies? Why the outright denial and plain avoidance? Why won’t they level with you?
Maybe they do not know any better. Maybe they think that the same strategies that work for the wealthy will work for the middle class. Maybe they are doing the best that they can. Maybe they cannot help it.
Consider the possibility that your advisor learned “best practices” from a “wealth management” guru. Your advisor’s teacher excelled at preserving and growing “old money.” Your advisor was inspired by someone who hobnobs with wealthy folk day-in and day-out. The result: Your advisor may know how to deal with rich people. But what does that have to do with you?
Exactly nothing. According to Ernest Hemingway, the rich are different than you and me. “Yes, they have more money.” Planning for $50,000,000 is not like planning for $500,000. How is that not obvious?
Broken: How The Middle-Class Does Long-Term Care
You spend. And spend. And keep on spending. $12,000 each month for skilled care. $6-7500 each month for assisted living. $25 each hour for companion care at home. More if you want a certified nursing assistant or nurse. Asset allocation? Hardee-har-har.
And then you are broke. Medicaid to the rescue!
Your estate plan is meaningless. Your financial plan is out the window. Your lifetime of work and savings has evaporated. Middle class planning that fails is broken. Let us be honest.
What if we faced the fact that you are not the Great Gatsby? That you do not have a couple million to allocate to long-term care? That long-term care for middle class people like us means Medicaid? Sooner or later, Medicaid will be the solution. Four out of five people in skilled nursing facilities are on Medicaid. 80%. That is reality. Thousands of families receive at-home care through Medicaid. That is also reality.
Fix It: The Middle-Class Can Win Long-Term Care
Recognize that long-term care is a reality for the vast majority. Two-thirds of women, half of men are eventually institutionalized. Accept that Medicaid is the way America pays for long term care.
Anticipate. Plan to preserve your lifesavings. For yourself. For your spouse. For the next generation. The world needs you and your values. Dying in poverty is no way to demonstrate success.
There are 3 goals of LifePlanning™
#1 No Poverty. You will not go broke. Your choices will matter. Your family will succeed.
#2 No Handouts. You have paid into the system with every paycheck, every IRA Required Minimum Distribution, every tax payment. You are not looking for charity or a free ride. Only a bit of fairness.
#3 No Waste. Your hard-earned savings will not be wasted on probate. Will not be thrown out the window. Will not be intercepted by predators or creditors. Your legacy will be of life well-lived. And support for the next generation.
There is no problem with rich folks being rich or planning that takes account of wealth. Good for them.
There is a big problem with advisors giving the same advice to middle class workers and savers that they give to those rich folks. Do not fall into this trap. Learn how. It is super easy. Barely an inconvenience. On your schedule. In the comfort and safety of your own home. In the comfort and safety of one of our workshop rooms. In the comfort and safety of wherever you find comfort and safety.
Sending Just Money To The Next Generation – Easy. Worthless.
Sending Money With Values To The Next Generation – Difficult. Priceless.
Sixty minutes to personal control. Because you earned it. Avoid Nursing Home Poverty. Thousands of middle-class families have learned and use these techniques. Why not yours? Transmit your values along with your stuff.