Transcribed Image Text
Use Worksheet 8.1 Katie Holt is a 72-year-oldwidow who has recently been diagnosed with Alzheimer's disease. Shehas limited financial assets of her own and has been living withher daughter Laurie for 2 years. Her only income is $850 a month inSocial Security survivor's benefits. Laurie wants to make sure hermother will be taken care of if Laurie should die. Laurie, 40, issingle and earns $70,000 a year as a human resources manager for asmall manufacturing firm. She owns a condo with a current marketvalue of $65,000 and has a $39,000 mortgage. Other debts include a$3,500 auto loan and $500 in various credit card balances. Her401(k) plan has a current balance of $35,500, and she keeps $4,500in a money market account for emergencies. After talking with hermother's doctor, Laurie believes that her mother will be able tocontinue living independently for another 3 years. She estimatesthat her mother would need about $1,850 a month to cover her livingexpenses and medical costs during this time. After that, Laurie'smother will probably need nursing home care. Laurie calls severallocal nursing homes and finds that it will cost about $4,000 amonth when her mother enters a nursing home. Her mother's doctorsays it is difficult to estimate her mother's life expectancy butindicates that with proper care some Alzheimer's patients can live10 years after diagnosis. Laurie also estimates that her personalfinal expenses would be around $13,000, and she'd like to provide a$30,000 contingency fund that would be used to pay a trusted friendto supervise her mother's care if Laurie were no longer alive. UseWorksheet 8.1 to calculate Laurie's total life insurancerequirements. In your analysis, assume an incidental special needamount of $13,000.$ Recommend the type of policy she should buy. In your analysis,assume an incidental special need amount of $13,000.