In This Issue
Prepaid Funeral Plans: Buyer Beware 
Funerals rank among the most expensive purchases many consumers will ever make. A traditional funeral costs about $6,000, although"extras"like flowers, obituary notices, acknowledgment cards and limousines can bring the total to well over $10,000. And people often"overspend"on a funer al or burial because they think of it as a reflection of their feelings for the deceased. To help relieve their families of some of these decisions, an increasing number of people are planning their own funerals, designating their funeral preferences, and sometimes even paying for them in advance. In fact, many elder law attorneys advise prepayment as a way to invest in assets that will not be countable by Medicaid or as Supplemental Social Income (SSI). However, consumers lose millions of dollars every year when pre-need funeral funds are misspent or misappropri ated. A funeral provider could mishandle, mismanage or embezzle the funds. Some go out of business before the need for the pre-paid funeral arises. Others sell policies that are virtually worthless. Consumers received some protection from unscrupulous funeral providers with the creation of the Funeral Rule in 1984. This rule, administered by the Federal Trade Commission (FTC), requires funeral providers to give consumers accurate, itemized price information and other spe cific disclosures about funeral goods and services. Unfortunately, the Funeral Rule does not apply to many of the features of pre-need contracts, which are governed solely by state law. Every state except Alabama has laws covering pre-need con tracts, but protections vary widely from state to state. Some state laws require the funeral home or cemetery to place a percentage of the prepayment in a state-regulated trust or to purchase a life insurance policy with the death benefits assigned to the funeral home or cemetery. Other states, however, offer buyers of pre-need plans little or no effective protection. Below are some questions the FTC rec ommends asking before signing up for a pre-need funeral arrangement. The questions are from the FTC's "Funerals: A Consumer Guide" found at www.ftc.gov /bcp/conline/pubs/services/funeral.htm. • What happens to the money you've pre
paid? States have different requirements
for handling funds paid for prearranged • What happens to the interest income on money that is prepaid and put into a trust account? • Are you protected if the firm you dealt with goes out of business? • Can you cancel the contract and get a full refund if you change your mind? • What happens if you move to a different area or die while away from home? Some pre-paid funeral plans can be transferred, but often at an added cost. You should find out exactly what you are paying for and compare with other funeral providers. And make sure the price is locked in and additional money won't be required at the time of death. These pitfalls can be avoided, of course, by making decisions about your arrangements in advance, but not paying for them in advance. Be sure to tell your family about the plans you've made, and let them know where the documents are filed. If your family isn't aware that you've made plans, your wishes may not be carried out. You may wish to consult an attorney on the best way to ensure your wishes are followed. One way to ensure there is money available to pay for the funeral is to set up a payable-on-death account (POD) with your bank. Make the person who will be handling your funeral arrangements the benefi ciary (and make sure they know your plans). You will maintain control of your money while you are alive, but when you die it is available immediately, without hav ing to go through probate. Sometimes it's more convenient and less stressful to "price shop" funeral homes by telephone. The Funeral Rule requires funeral directors to provide price information over the phone to any caller who asks for it. If you run into problems or have ques tions about your state's laws, most states have a licensing board that regulates the funeral industry.
Report: Medicare Advantage plans can be too good to be true Medicare Advantage plans have serious disadvantages over original Medicare, according to a new report by the Medicare Rights Center, Too Good To Be True: The Fine Print in Medicare Private Health Care Benefits.
The idea behind the plans is to provide better services while lowering out-of-pocket costs. However, it doesn't always work that way, according to the Medicare Rights Center. While the plans must provide a benefi±"package"that is at least as good as Medicare and cover everything Medicare covers, the plans do not have to cover every benefit in the same way. For example, plans may pay less for some bene fits, like skilled nursing facility care, and offset this by offering lower co-payments for doctor visits. The report, based on thousands of beneficiary calls to the Medicare Rights Center, lists nine common problems with Medicare Advantage plans: -Care can cost more than it would under original Medicare. -Private plans are not stable and may suddenly cease coverage. -Members may experience difficulty getting emergency or urgent care. -Because plans only cover certain doctors, the continuity of care is often broken when the plan drops a provider. -Members have to follow plan rules to get covered care. -Members are restricted in their choices of doctors, hospitals, and other providers. -It can be difficult to get care away from home. The extra benefits offered often turn out to be less than promised. -People with both Medicare and Medicaid can encounter higher costs.
QUESTION. . My father, age 92, has dementia and it is suggested that I become his legal guardian. What does this involve and what are the costs? -S.C.
ANSWER. Guardianship (or"conservatorship"ir states) involves a court appointment to step into your father's shoes and make all health care and financial decisions for him. Some decisions require further court approval and you must file an annual account with the court of your handling of your father's finances. The cost to get appointed is usually a few thousand dollars, plus a smaller amount each year to prepare and file the accounts. The expense and bureaucracy of the guardianship process usually can be avoided by executing health care proxies and durable powers of attorney while the individual still has capacity, but it sounds like it is too late for this in your case, unfortunately.
Long-term care insurance a better bet for women, study finds Long-term care costs can devastate a family's financial well-being if not appropriately planned for. One way to plan is to purchase long-term care insurance, but premium costs can be a financial burden for middle-income families. What if you took the same money you would pay for premiums and invested it yourself - that is, what if you self-insured for the possibility of requiring long-term care? Researchers at the University of Southern Maine conducted a study to determine just how financially desirable long-term care insurance is compared with self-insuring. Specifically, they looked at the financial feasibility of making annual insurance payments to cover nursing home care for up to $4,000 a month for a maximum of five years. They estimated these payments to be $1,190 for someone beginning to pay at age 40, $1,867 for an individual starting at age 55, and $3,322 for someone starting at age 65. The researchers compared the purchase of insurance with the opportunity cost of investing the required funds at three different rates of return. Although the results varied depending on how the average length of a nursing home stay was determined, researchers found that long-term care insurance generally appears to be "quite desirable" for women but only moderately so for men. This is because men pay the same premiums but have a lower probability of needing nursing home care and have shorter average stays than do women. The greater the return on investment, the more desirable self-insuring became for men. And the study concluded that self-insuring is the more desirable alternative for older men (age 65) at any of the three levels of investment return. The researchers note that substituting higher 2006 premium quotes made the purchase of long-term care insurance even less desirable for some males. But they also cautioned their analysis did not account for tax breaks that purchasers of long-term care insurance would receive. Critics of the study say it focuses on nursing home care. Much care is provided at home or in assisted living facilities, which can be covered under many modern long-term care insurance policies. The study appears in the online edition of the Journal of Financial Planning (www.fpanet.org/journal/articles/2006_Issues/jfpll 06-art7.cfm).
Estate planning lessons from Anna Nicole Smith's death The unexpected death of Anna Nicole Smith created a media circus and court battles over her burial but there are some valuable estate plan ning lessons to be learned from the controversy. Vickie Lynn Marshall, a.k.a. Anna Nicole Smith, the former Playboy Playmate and widow of billionaire J. Howard Marshall, left behind a five-month old daughter. Her adult son died last September. According to estate planning experts, her will contains some serious flaws that could tie her estate up in court for years to come. This illustrates how important it is to keep a will up to date. When Smith wrote her wilt she had only one child. Her son died shortly after her daughter was born, but she never updated her will. Because her will leaves her entire estate in trust to her son, making no provision in the event he died before her, the trust will likely fail and her estate will probably to her daughter under the laws of intestacy (when someone dies without a will). Causing further confusion is a provision in the will specifically disinheriting future children, which also shows why Smith should have kept her will up to date. Another important reason to keep a will updated is to name a guardian for minor children. Because Smith had not updated her will after the birth of her daughter, no guardian was named for the baby. While it probably wouldn't have avoided the paternity fight over Smith's daughter, a will is the place to make your wishes regarding guardians clear. Without a guardianship provision, it is up to the judge to decide what is best for your chil dren and the judge's decision may not accord with your wishes. Smith may have also been able to avoid the fight over her burial if she had made definite burial plans. Smith's mother wanted her buried in the family plot in Texas, while her longtime companion claimed she wanted to be buried next to her son in the Bahamas. If Smith had put her wishes in writing, her fam ily and friends would have known exactly what she wanted. The most important thing to remember is to hire an experienced estate planning attorney to draft your estate plan. Some of the prob lems with Ms. Smith's estate could have been avoided with better planning.
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Medicare Advantage plans are provided by private insurers, unlike original Medicare, which is provided by the government. The government pays Medicare Advantage plans (formerly called Medicare managed care plans) a fixed monthly fee to provide services to each Medicare beneficiary under their care.The plans often look attrac tive because they offer the same basic coverage as original Medicare, plus some additional benefits and services that original Medicare doesn't offer. 