Financial Planning

Prepare for the Unexpected

November 02, 2022

Although a positive outlook is good for your health, it is equally important to plan for life’s potential hurdles.

Identifying and addressing risks to your wealth help you protect your loved ones and live life with confidence. Here are three tools that enable you to prepare for the unexpected.

  • Disability Insurance: According to the Social Security Administration, a 20-year-old worker has a one-in-four possibility of developing a disability before reaching full retirement age.1

To guard against long-term wage loss, you may want to purchase long-term disability insurance that picks up when short-term benefits expire. Review your employer’s benefits package to see if your employer provides this coverage.

The Family and Medical Leave Act (FMLA) entitles those who work for a covered employer (under certain conditions) up to 12 weeks of unpaid job-protected leave for illness or to care for loved ones.

  • Long-Term Care Insurance: There is a possibility that you or a loved one may someday need assistance with ‘activities of daily living,’ such as eating, dressing, and bathing.

According to the U.S. Department of Health and Human services, nearly 70% of adults over age 65 ultimately need some type of long-term care for an average of about three years.2 Degenerative illnesses, such as Alzheimer’s Disease (which affects about 6.5 million Americans over age 65 today), are a leading cause of the need for long-term care.3

If you have to pay for the cost of care out of pocket, know that it can be very expensive. For example, the annual cost of a Homemaker Health Aid runs about $70,000 per year, while the rent for a one-bedroom assisted living facility ranges from about $60,000 to $80,000 per year, depending upon where you live.4

Over time, these expenses could accumulate to hundreds of thousands of dollars or more, reducing the size of the estate you leave to loved ones. This is because Medicaid, which is needs-based, is difficult to qualify for, and Medicare does not cover care past 100 days5. For some individuals, especially those around 50 years of age, purchasing long-term care insurance may make sense. And if you use it, the benefits are typically income-tax free.

  • Life Insurance: Life insurance coverage gives you the peace of mind that your family will be financially protected should something happen to you.

Although life insurance proceeds are not subject to income tax, they are included as part of your taxable estate. An irrevocable life insurance trust (ILIT) may be an appropriate estate planning tool to reduce your taxable estate if your assets plus life insurance will exceed the estate tax exemption threshold. While the Tax Cuts and Jobs Act of 2017 raised the threshold from $5.6 million to $11.2 million, it is due to revert back when the Act expires at the end of 20256. In addition, an ILIT, which can be created to own a term or permanent life insurance policy, offers the protection of a trust. For example, the assets in the ILIT are shielded against creditors, and you have the ability to indicate how the benefits should be used. However, since the trust is irrevocable, it cannot be amended or revoked. And there is a three-year waiting period before exclusions apply.

Count on your Washington Trust Wealth Advisor for guidance

To help ensure your loved ones are protected, speak with your Washington Trust Wealth Advisor about insurance and other risk management solutions that can help to preserve your assets and provide financial security for you and your family.

Not yet working with a Washington Trust Wealth Advisor? Please contact us to learn more!

1Disability Benefits, Social Security Administration, August 2022

2 How Much Care Will You Need? U.S. Department of Health and Human Services,, February 18, 2020

3 2022 Alzheimer’s Disease Facts and Figures, Alzheimer’s Association

4 Genworth 2021 Cost of Care, Genworth

5 Medicare Coverage of Skilled Nursing Facility Care, U.S. Department of Health and Human Services, Revised July 2019

6 Estate and Gift Tax FAQs

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