Sunday, March 10, 2013

Mitigate the Risk of Long-term Care with your Family Business

By Frank Sardony


Chronic family illnesses can cause a lot of emotional, physical, and financial stress. In the course of a lifetime, most people will have to care for an ill loved one. The costs of long-term care often place a heavy financial and emotional burden on family members. However, with smart planning family business owners can minimize these difficulties.

The emotional impact of giving care to a loved one can certainly be overwhelming. Not surprisingly, many studies show that taking care of someone who is chronically ill has a negative physical and mental impact on those involved. The stress can frequently lead to misuse of alcohol and prescription drugs, as well as cases of depression and coronary heart disease.

Of course,caring for an ill family member can often deplete a family's finances. Reports reveal that the national average cost of a nursing home is typically $6,000 a month. An average stay is around 3 years.

Even if you choose to take care of your loved one yourself, the costs can still be high. For example, research studies indicate that wage, Social Security, and pension losses due to caregiving is on average $304,000. In realizing this potential situation, we can realize how a sickness can seriously impact your family finances, harmony, and dignity.

Most professionals recommend having a meeting with all members of your family to develop a plan for dealing with caregiving, should the need arise. You may wish to include your advisers in the discussion, as well. There are two principal goals that should be focused on in the plan. First, is to protect the psychological and physical welfare of your loved one by managing their care, and not actually providing it. Developing a strategy for protecting your family's wealth should be the second goal. A effective way to do that is to have a third party finance the care.

purchasing an insurance policy to provide benefits for home health care or long-term care could be a part of the solution. There could be significant tax benefits if your family business funds the costs. For instance, if you own a C corporation, you are allowed to develop a plan that will cover business owners, along with their spouses, and select key workers. The costs may be tax deductible to your business, and if certain provisions are met, the benefits could be tax-free.

Generally, most people choose to finance their insurance premiums over their lifetime. However, many entrepreneurs elect to pay the premiums over a shorter period of time, perhaps ten years. This tactic allows them to get the most tax advantage, and still be covered for life. There are many tax implications for buying insurance through your business that differ according to the type of establishment you have. That is why it so important to seek advice from all your legal and tax advisers before purchasing a plan.

It is apparent that providing care for an ill family member can be a challenging time in one's life. It can impact many aspects of a family and a business. By having open discussions with your loved ones, deciding who will provide the care, what type of care to provide, and how to finance that care, you will help keep your family, business, and finances intact.




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