If you take a simplistic view of the relationship of couples, it’s actually very similar to the relationship between partners in a business.   In a business relationship, there are financial ramifications on one partner in the event of death, incapacitation, divorce, bankruptcy or retirement; and this is precisely why smart business partners implement a “Buy/Sell Agreement”.   From a proactive financial planning perspective, Long-Term Care Planning can be viewed as a Buy/Sell Agreement for couples.

For business owners, a Buy/Sell Agreement “is a legally binding agreement between co-owners of a business that governs the situation if a co-owner dies or is otherwise forced to leave the business, or chooses to leave the business.”   According to Robert Wood, a contributor to Forbes Magazine, this kind of “agreement can ward off infighting by family members, co-owners and spouses, keep the business afloat so its goodwill and customer base remain intact, and avoid liquidity problems.”   Any way you look at it, a Long-Term Care plan addresses the same concerns for couples!!

What is a Long Term Care Plan?

Americans save diligently throughout their working years, in order to maintain their lifestyle during retirement. Unfortunately, most people don’t factor into the equation the potential impact of future Long-Term Care needs.  Recently, Fidelity Investments released their annual report on healthcare expenses in retirement, and concluded the average couple, now age 65, will need to spend approximately $240,000 on out-of-pocket healthcare expenses during their retirement years.   However, they did NOT include potential Long-Term Care expenses in their calculations.   Given the fact that nearly 70% of all retirees will require some form of Long-Term Care services during retirement; the need for planning becomes evident.

When discussing potential Long-Term Care needs, it’s very important to understand how and where care can and will be provided.   Long-Term Care services range from basic care in the home to full-scale medical care in a nursing home.  The majority of Long-Term Care services provide assistance with “Activities of Daily Living” (ADL), such as dressing, bathing, eating, transferring, and toileting.  Those who have difficulty performing two or more of the ADLs, due to physical limitations, severe cognitive impairment, or both, are generally considered to be in need of Long-Term Care services. 

The “Couple's Buy/Sell Agreement”

While a formal, legal agreement is required for business owners to implement a Buy/Sell Agreement, there is no such requirement for married couples; however, there are other concerns for non-married or same-sex couples.   In any event, a Buy/Sell Agreement for business owners, like a “Couples Buy/Sell Agreement” should be properly “funded”.   In the context of this discussion, determining the proper solution(s) is the key to successful implementation of a plan.

Regardless of whether you view it as a Couples Buy/Sell Agreement, or simply Long-Term Care planning, it should be done as early as possible and become a component of one’s financial and retirement planning.   Don’t make the mistake and put off planning until it’s too late.   As you, your loved ones or your clients prepare for the future, proper planning today for an uncertain tomorrow can help ensure a secure retirement and long term financial goals.