A serious illness of a loved one can have a heavy financial, emotional, and physical impact on a family. Throughout our lives, we will all know or live with someone who needs long-term care. The costs of providing care for a disabled person can be significant, and can cause a family to suffer emotional and financial hardship. But with proper planning, family businesses can minimize these hardships.
The mental and emotional stress of providing care is often overlooked. Feelings of dependence, anger, envy, responsibility which are all apart of caregiving can rip families apart. It is no wonder that many studies reveal that providing care may contribute to coronary heart disease, depression, along with the abuse of alcohol and prescription medications.
Caregiving can also have a substantial effect on your family finances. Studies suggest that the average nursing home cost is around $72,000 annually. The average stay is around 3 years.
Even if you choose to take care of your loved one yourself, the costs can still be considerable. 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.
To mitigate this financial and emotional burden, it is important to discuss your situation as a family, and put together a manageable plan. The plan should have two primary goals. One is to protect the physical and emotional well being of your family member by managing their care, and not necessarily providing it. The second objective is to maintain your family wealth. One way to do this is to have a third party pay for the care.
As part of your strategy, you could purchase an insurance policy to cover both home health care and long-term care. Paying the costs through your business could be beneficial because of the tax benefits. If you own a C corporation, you can set up a plan that will cover you and your spouse, as well as select workers that meet certain criteria. If certain conditions are met, the premiums could be tax deductible, and the benefits tax-free.
In general, most people pay their premiums for life. But many businesses elect to pay the fees over a shorter period of time, say ten years. This allows them to capitalize on their deductions and still have coverage for life. The tax implications for long-term care policies are complicated, and largely depend on the type of business involved. Consult your tax advisors to make sure you are following all the rules.
It is apparent that providing care for a sick loved one can be a trying time in one’s life. It can affect many areas of a family and a business. By having open discussions with your family, deciding who will provide the care, what form of care to provide, and how to pay for that care, you will help keep your family, business, and wealth intact.
To increase your knowledge on topics affecting business-owning families, consider reading additional articles on family businesses.
