THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, February 3, 1995 TAG: 9502010118
SECTION: VIRGINIA BEACH BEACON PAGE: 01B EDITION: FINAL
SOURCE: Pam Starr
LENGTH: Long : 121 lines
A POSITIVE MENTAL attitude can help you in just about anything.
Anything, that is, except financial planning, especially if you're disabled, seriously ill or elderly. That's when you need to plan ahead for worst-case situations and realistically look at what could happen.
Certified financial planner Ron Pearson says there are thousands of people in Hampton Roads who need financial help in caring for loved ones, but they don't know where to go or who to ask.
That's why Pearson, 48, owner of Beach Financial Advisory Service, has begun giving free seminars on financial planning. He targets those organizations whose members are disabled or terminally ill or who are taking care of people like that.
``Fifty percent of all bankruptcies happen because of medical costs,'' said Pearson from his Oceanfront home and office. ``There's a real need for information and it's not readily available.
``I'm the parent of two mentally retarded children,'' he continued. ``I tried to determine what I could do for them, but I found it very difficult to get information. A lot of us lack knowledge about the tools already available.''
If you have a disabled child - no matter what your age (you may be an 85-year-old mother caring for a 66-year-old son, he said) - you must have a future plan in case of your death. The most important thing you can do is put together a letter of intent. This letter will cover your hopes and desires, such as who will care for the child, what religion the child will be raised in, what school he will attend, who will be his guardian and what kind of financial resources will give him adequate funds for life.
``To care for a disabled child can easily cost $1 million over a lifetime,'' said Pearson, a retired Navy captain. ``Whether the family is low, middle or high income, you need to have a plan that encompasses all of the family and health care professionals who will be dealing with the child.''
One of the biggest problems for parents of disabled children is they don't understand the impact of entitlement programs. For example, once a disabled child reaches 18, he is eligible for Supplemental Security Income (SSI), no matter how much money a parent makes. But the child must have less than $2,000 in assets and have income of less than $500 a month to become eligible for Medicaid.
``So if someone dies and leaves Johnny more than that, it's not enhancing Johnny's life,'' Pearson said. ``An option, if grandparents left money for Johnny, would be to hold it in a special needs trust.''
A special needs trust is, to put it tritely, the gift that keeps on giving until it's dissolved. A lawyer will charge anywhere from $250 to $1,500 to draw up the trust, then you or others can deposit money monthly or in one lump sum. This trust provides the executor the discretion to enhance the disabled child's lifestyle, said Pearson, without impacting government benefits.
``I didn't know there was such a thing as a special needs trust when I had my boys,'' Pearson said, speaking of his sons, aged 20 and 23. ``If I had been putting money in a trust for them it would have greatly increased their lifestyle.''
When you're dealing with a serious illness, funding can get a little trickier. Financial sources can be entitlements, medical insurance, disability insurance, credit management, cash from life insurance and work-related benefits. All of these sources are significant, but Pearson said he believes the best thing you can do when you become ill is to maintain your medical insurance if you are paying the premiums.
``Insurance will pay what is usual, customary and reasonable care,'' he said. ``If a doctor charges $500 for treatment, and customary is $400, then the insurance company pays 80 percent of that $400.''
It's also important to keep paying your monthly credit card bills, student loans, car loans and mortgages, to be in good standing with credit agencies and to maintain ``maximum liquidity.''
``You don't want to pay off your student loan because it can be forgiven if you're disabled,'' said Pearson.
Serious illness can also increase the cost for diets, home care, medical travel, specialized housing, prescriptions, deductible co-pays, experimental treatments and taxes. There could even be a quality-of-life expense, Pearson explained.
``If you're given only a few months to live, you may decide that you always wanted to go wherever and that costs money.''
One of the newer programs that can help the terminally ill, those who have less than 12 months to live, are viatical settlements. With this, you sell your life insurance policy to a third party and receive 50 percent to 75 percent of the face value. This does place you in a higher taxable income bracket, but Pearson said some people need a viatical settlement because of ``horrendous'' costs for treatment.
``This settlement will give you up-front cash before you die. Maybe you need it,'' said Pearson. ``It becomes tax-free after you die, which means more is available to your heirs.''
Financial planning tools for the elderly include guardianship, durable power of attorney, revocable living trusts, irrevocable trusts, joint bank accounts, living wills, health care power of attorney and life insurance versus long-term care insurance.
Pearson is available to groups at no charge to give talks on Financial Planning for the Disabled, Personal Finance and Serious Illness, and Financial Planning for the Elderly.
Pearson is a fee-only registered investment adviser and insurance consultant and can be reached at 428-6634.
TOO BAD WILLARD SCOTT OF THE ``TODAY SHOW'' won't be televised on Sunday.
That's when Grace Nicosia becomes eligible to have Scott congratulate her for turning 100.
Instead, Nicosia will enjoy a private party with family, friends and staff at Hillhaven Holmes Convalescent Center. Daughter Antoinette Lupia and granddaughter Nanette Kopasakis said that Brooklyn-born Nicosia is a strong woman who raised eight children during the Depression and never worked outside the home.
``She used to like to cook and sew and clean,'' said Lupia. ``She was not a complainer. I never thought she would live to be 100.''
Nicosia has 36 grandchildren and 14 great-grandchildren, some of whom will attend the birthday party. Although she can't understand what is going on much of the time, Nicosia does like to have company, especially babies and children. And ice cream is her favorite food.
Please join me in wishing her a very happy birthday. ILLUSTRATION: Photo by PETER D. SUNDBERG
Ron Pearson, owner of Beach Financial Advisory Service, gives free
financial planning seminars to organizations with members who are
disabled or terminally ill.
by CNB