Money Buzz 04/03

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Long-term care insurance, policies that provide benefits if purchasers have to move into nursing homes or need home care, used to be associated with the elderly. But providers have begun marketing long-term care insurance to younger men and women. MassMutual has even teamed with the U.S. Chamber of Commerce to offer long-term care insurance to small-business owners. But insurance analysts say such insurance is an unwise investment for entrepreneurs in their 30s and 40s.

"At that time in your life, you're worried about lost income from missed work, and missed work would be covered by disability insurance," says Patrick Brady, executive director of Citizens for Long Term Care, an organization representing all segments of the long-term care debate.

In contrast, people in their 50s, 60s and 70s are more concerned about protecting their assets in case they have to move into a nursing home, and therefore could use long-term care insurance. Brady suggests entrepreneurs wait until they turn 60 to buy a policy-a time when long-term care insurance is still affordable-and buy the most flexible option possible.

Estate of Affairs
Since Congress repealed the federal estate tax in 2001, entrepreneurs have welcomed the opportunity to inherit or pass on their businesses without paying any tariff. But in some places, that opportunity will never exist. Confronting massive deficits and compelled by law to balance their budgets, 11 states and the District of Columbia have "decoupled" from the federal estate tax repeal. In other words, they will not repeal their state estate taxes, tariffs most entrepreneurs never paid before because they previously received a credit for paying the federal tax and applied this credit to their state estate tax. Now, however, small-business owners in these areas will have to pay a state estate tax, and more entrepreneurs will be affected, because states have a lower threshold-$675,000 compared with $1 million under the old federal law-for taxing estates.

What's more, says Elizabeth McNichol, senior fellow at the Center on Budget and Policy Priorities, a nonpartisan Washington, DC, think tank, more states may follow. "The economic stimulus package could cut harder into state revenues and many state governments [will] decouple from the estate tax to compensate," McNichol says. Still, entrepreneurs can take comfort in the fact that family-owned companies are often able to defer state estate tax payments for up to 14 years. To learn more about estate taxes, visit www. cbpp.org.