Will I Lose My Family Business if I Need Long Term Care (Part 1)
Joe built his construction business from nothing. He was able to provide for his family, put his children through college and live a nice life on the income generated from it. Now in his 70’s, Joe doesn’t work much anymore. He goes into the office a few days a week, receives a paycheck, but he has turned over the day to day operations to his sons who have expanded the business. But recent heart surgery and his good friend’s recent diagnosis of Alzheimer’s disease has caused Joe to consider what would happen if he needed long term care. Is his business in jeopardy?
The answer to that is yes. You see, Joe still owns 100% of the business. He estimates that it is probably worth close to $750,000. He also owns the building in which his company is housed and that is probably valued at another $500,000. He receives rental income from the business and 3 other tenants there. He and Mary have other investments totaling $200,000. Joe figures that if he or Mary need long term care he’ll use the investments. When that’s gone he’ll still have the salary plus rental income and his sons will pay for the rest of their care at home through the business.
But, is this realistic? What Joe doesn’t realize is that 24/7 long term care averages about $125,000 per year. If both Joe and Mary need care, that’s a quarter of a million dollars a year. When I explain this to Joe he quickly tells me that there is no way the business can support that kind of expense. Quite frankly, what business can? Joe also tells me that he and Mary don’t have long term care insurance. If they can still get it, I would strongly urge them to purchase it. But if they can’t get it, what then? We’ll look at some of those options in next week’s post.