A family illness can have a serious impact on your family business. The unfortunate truth is that most people will have to care for a loved one at some point in their life. Providing that care can place a large burden on a person’s mental health, as well as their finances. That is why it is important to plan ahead in order to lessen the stress of the situation.
The emotional impact of giving care to a loved one can certainly be overwhelming. Not surprisingly, many studies show that taking care of someone who is chronically ill has a negative emotional and physical impact on those involved. The stress can frequently cause misuse of alcohol and prescription drugs, as well as cases of depression and coronary heart disease.
Of course,long-term care for a sick family member can often deplete a family’s finances. Reports indicate that the national average cost of a nursing home is around $6,000 per month. An average stay is about 3 years.
An option could be to provide the care yourself, but the costs are still large. According to recent studies, by taking time off from work, the average caregiver gives up a total of $304,000 of pension, Social Security, and wage income. Not to mention, who will pick up the slack in your family business if you take time off.
Most experts recommend having a discussion with all members of your family to come up with a plan for dealing with caregiving, should the necessity arise. You may wish to include your advisers in the meeting, as well. There are two primary goals that should be addressed in the strategy. First, is to maintain the psychological and physical welfare of your family member by managing their care, and not actually providing it. Developing a strategy for protecting your family’s wealth should be the second objective. A viable way to do that is to have a third party pay for the care.
As part of your strategy, you could purchase a plan to cover both home health care and long-term care. Funding the premiums through your business may be beneficial because of the tax benefits. If you own a C corporation, you can set up a plan that will provide coverage for you and your spouse, as well as key workers that meet certain criteria. If certain provisions are met, the costs could be tax deductible, and the benefits tax-free.
Many individuals elect to finance the long-term care policy over the course of their life. However, business owners often elect to fund the insurance over a shorter period, perhaps 10 years. This strategy lets them finance the costs while they are still working, in a tax-advantaged way. The tax implications differ according to the type of business involved. Seek the advice of an accountant to be sure that you are adhering to the laws.
It is obvious that caring for a sick family member can place a huge burden on your family. Many families have to contend with this type of circumstance at some point, and it often impacts several areas of family life. This is why it is critical for you to start planning ahead and have an open conversation with all family members about what type of care will be provided, who will provide the care, and how it will be paid for.
To increase your knowledge on topics affecting business-owning families, consider reading additional articles on family businesses.