By Richard D. Rooney,
Richard D. Rooney, a graduate of Oberlin College and the Wharton Graduate Division
of the University of Pennsylvania, is a partner in the Annapolis, Maryland financial
planning firm of Roche-Rooney. He has been a financial services practitioner for
more than 20 years in the Annapolis area.
In addition to his professional activities, Mr. Rooney is an avid golfer and an active
community volunteer including service as Chairman of the local United Way campaign,
President of the Rotary Club, and a member of the Board of Trustees of the local
community hospital. He is the father of three children and proud grandfather to
Financial planning for caregivers and the people for whom they care involves a number
- Cash Flow
- Legal Documents
- Income and Estate Taxes
A central element of prudent financial planning requires a budget-a summary of expected
expenses compared against income. If there is a deficit (an excess of expenses over
income), some way to correct the deficit must be found. People can look for new
or increased sources of income and they can reduce expenses. To achieve and maintain
sound financial health, one must have income and expenses in balance.
Everyone has a will. If you have not prepared a will, your state of legal
residence has a default will for you. Oftentimes, the state-provided default will
fails to take into account special needs and circumstances of family members. Therefore,
prudent financial planning calls for the preparation of a will prepared by a qualified
lawyer suitable to your circumstances. Once a will is completed, you should periodically
review its provisions to insure it expresses your wishes-your will. The expense
of a well-prepared will is minimal compared to the comfort and convenience provided
to one's heirs.
A durable power of attorney is an extremely useful document for protection
of legal and financial rights of people who become incapacitated. It must be properly
prepared according to the laws of your state of residence prior to one's incapacity.
Similarly, a medical power of attorney provides authority to someone to direct
medical care of a person suffering a disability. Once again this must be done before
it is needed.
Many states provide a standard living will which offers directions on life-saving
medical treatment, hydration, etc.-measures for people in failing health.
Insurance (see also Insurance Issues
We recommend everyone have some kind of health or medical insurance to provide
coverage for major medical expenses. Typically, this is obtained through one's employer
and includes coverage for the employee as well as dependants. U.S. citizens age
65 and older are eligible for Medicare and can supplement that coverage with private
People who are employed should also have long-term disability insurance to
provide continuing income in the event of a disability which causes a loss of earned
income. Once again, many employers provide such coverage, but individually owned
policies are available.
Life insurance is a necessity for many people who are providing financial
support to others. Employers often provide life insurance as part of their group
benefits, but once again, individually purchased life insurance may be necessary
to provide sufficient coverage.
Long-term care insurance is recommended for people age 50 and above to provide
for the expense of nursing home care, care in assisted living facilities, home-based
care or adult day care. A few employers offer group long term care insurance at
this time, but most long term care coverages are purchased through individual policies.
You should also have homeowners insurance (or renters insurance) to protect
your household goods. If you have valuables such as jewelry or other collectibles,
you should make sure your policy includes coverage for them either as a part of
the main contract or as a special rider.
People who have investments such as retirement plans (IRA's, 401k's, and other pension
or profit-sharing plans) as well as private investment either in mutual funds, stocks,
bonds, savings accounts, or certificates of deposit should take care in how they
own those assets. Retirement assets (IRA, 401k, pension and profit-sharing) must
be owned by the individual for whom the benefit is provided. Other investment vehicles
can be owned in any number of ways. An annual review of one's financial circumstances
should include an examination of how assets are titled-joint with rights of survivorship,
joint tenants in common, individually, in a trust, etc.
Proper management of investments includes maintaining current records of what your
investments are, where they are held, and how they are titled. Periodic statements
from brokers and banks should be kept in a safe place where trusted family or friends
know about their existence.
Income and Estate Taxes
Anyone with earned income is required to file federal and (in most states) income
taxes, so it is important to keep a record of income sources and amounts as well
as items that may be deductible against your income taxes. Estate taxes are the
government's final taxation-they get us even after our death! Estates in excess
of $675,000 (in the year 2001) must pay estate taxes. This amount will gradually
increase to $1 million in 2006.
Transfers of assets to a surviving spouse are excluded from estate taxation at the
death of the first marital partner, but will be subject to estate taxes at the death
of the surviving spouse.
We recommend that people make a checklist of things to do as part of their financial
planning. As they complete a task, check it off and note the date they have completed
This all may seem like a great deal of work, but taken on a piecemeal basis it can
be accomplished in relatively short order and with good feelings.