BY ANTHONY J. ENEA
When recommending the purchase of long-term care insurance, or LTCI, to my clients, the most often heard response has historically been, “I don”™t want to have to pay the premiums for the rest of my life.” For many 55- to 70-year-olds, a potentially lengthy premium payment period is a psychological obstacle they are unable to overcome in making the decision to purchase LTCI.
According to the U.S. Department of Health and Human Services, nearly 70 percent of people turning age 65 will need long-term care at some point in their lives. While realistically there is no way of predicting who will need to enter a nursing home or need in-home care, the reality is that many will. That less than one-third of Americans aged 50-plus have begun planning for long-term care in any fashion is cause for concern.
LTCI is designed to cover a variety of long-term services such as personal and custodial care either at home or in a nursing home. The insurance company pays out a daily amount based on the size of the policy (extent of coverage). The costs of individual LTCI policies range greatly depending on a number of factors including, age, health, scope and length of coverage.
During the last five years, I”™ve noticed that a number of seniors have become significantly more receptive to the purchase of LTCI, specifically as part of a comprehensive elder law plan, which includes making transfers of assets to a Medicaid Asset Protection Trust. The transfer of assets to said trust would effectively create a five-year “look back” period for a Medicaid nursing home (not home care).
Once the “look back” period has been established, an ideal opportunity exists for the purchase of LTCI as protection from the cost of a nursing home during this five-year period. Ideally, the purchase of LTCI should coincide with Medicaid planning to provide coverage in the event that nursing home care is necessary during the “look back” period. Once the five years have elapsed (and the individual has effectively protected his or her home and/or other assets), the decision can be made whether to keep the policy.
For those still reluctant to buy traditional LTCI, another option to consider is a hybrid policy combining life insurance with LTCI. Still relatively new, hybrid products were introduced in the market about five years ago and continue to gain in popularity. While individual policies can vary greatly in terms of cost, benefits and potential restrictions, the most attractive aspect remains the same ”“ the buyer receives some benefit from their premiums even if long-term care is never needed. In such an event, death benefits would be paid to the buyer”™s beneficiary.
In my experience, LTCI is best utilized as part of an overall asset protection plan rather than as a stand-alone, long-term care option. It allows the individual the comfort of knowing that there is a light at the end of the tunnel as to the payment of policy premiums, rather than placing them in the difficult position of choosing to buy a policy that may never be used (with the possibility that premiums will have to be paid for a potentially lengthy period of time). Depending on the needs and assets of the individual, hybrid insurance may also be a viable alternative to traditional LTCI. Either approach, however, will require a coordinated effort between your elder law attorney and financial adviser or insurance agent.
Anthony J. Enea is a managing member of Enea, Scanlan & Sirignano LLP, with offices in White Plains and Somers. He is the past chairman of the New York State Bar Association”™s Elder Law Section and was named Westchester County”™s Leading Elder Care Attorney at the 2013 Above the Bar Awards. He can be reached at 914-948-1500 or A.Enea@esslawfirm.com.
Thank-you Anthony with writing this article on the topic of LTC planning.
It is inherent in our values that we want to receive a benefit for something we pay. We pay for gasoline so our vehicles will get us to work and other activities. We pay for utilities because it provides electricity and other services. We pay for various forms of insurance we may or may not use. The most useful insurance is health insurance because throughout our lives we will have various health issues.
So why own LTC benbefits? Why spend the money for a plan you may or may not use? Why not own life insurance with a LTC benefit?
Before deciding that you want to own any type of benefit what are the issues? For decades, LTC has been offered as a risk benefit. Statistics and all sorts of reasons: protecting assets, burden on the family, families buckling from having to be caregivers, guilt because your loved one is in a care facility, and other reasons.
The reasons to own are compelling. There is another approach which I think will be reasonable to people. Owning a plan is about consequences. What are your committments that you have now and will have moving forward in your life? What is your lifestyle and what will happen to the lifestyle of your family if you needed care?
The plan you own depends on what you want to accomplish. If you need life insurance to provide additional capital to your estate or to create an estate then own life insurance. A traditional LTC plan will pay for care giving and life insurance will provide funds for your estate.
Should you decide to own a hybrid plan there are considerations:
a. They are more expensive
b. What if your estate needs capital but you have used a good portion for caregiving or
vice versa.
c. Hybrid plans are not deductible
d. Some hybrid plans have inflation benefits, other plans do not
e. Underwriting is the same whether it is traditional or hybrid plan
Happy Columbus Day,
Raynmond
a. They MAY be more expensive, they may be less expensive. A hybrid plan can have a fixed, guaranteed premium. Traditional LTC generally (and maybe always) does not guarantee the premium but guarantees that the policy is non-cancelable. My mother, who has experienced an 85% premium increase on her LTC policy, would have appreciated a guaranteed premium product.
e. Underwriting may be the same but not always. There are hybrid plans that only underwrite for mortality and do not underwrite for morbidity. They also do not charge any added premiums for the LTC feature.
f. Some hydrid plan benefit payments are not expense reimbursement but rather indemnity payments. If you qualify, whether or not you have actual covered expenses, you can collect the stated benefit. e.g., being an early Azlheimer’s patient who could qualify for benefit but has family caring for them as did my mother in law for 2 yrs. She had two traditional LTC policies but had no qualified expenses to reimburse, so no benefits while her daughter cared for her at home.
The benefits of hybrid plans (not all are available in NY) are they take away a couple of concerns with traditional LTCi:
1) No use it or lose it benefits;
2) Lack of residual value;
3) Cost certainty.
Some of the non-NY plans (sometimes seniors who own residences in other states may still qualify) allow one to use pretax money to solve the problem. You are going to have to take a required minimum distribution from qualified plans at some point, why not convert some of those dollars into tax-free money for LTC? If you don’t use the LTC, you convert some of that qualified money to tax-free death benefit money.
Whichever option is most relevant to you, do not ignore the issue of care. No-one wants to spend their final years with little choice as to how or where they are cared for. Planning ahead and putting some savings away now, will give you peace of mind. It will also ensure that you are not a financial and emotional burden on those nearest and dearest to you. Start by checking out long term care quotes from different companies now, to help jump start your planning.
Long term care is considered as a pressing issue nowadays since a lot of older alduts will most likely require this type of care. Anthony here has highlighted all the important things that people should learn about long-term care particularly long term care insurance. This insurance product has been in the market for quite some time now but sad to say only a handful of people managed to purchase this. Why? Some people are confident that their retirement income will cover their care expenses in the future and will not need ltci while others find this too pricey.
Long term care insurance premiums are skyrocketing nowadays but it’s still possible to cut the cost. How? There are many ways to do it like by purchasing early, creating a small policy that is just enough to cover your expenses, availing group or couple discounts and by comparing quotes. It is the most comprehensive policy that you can get your hands on today, the reason why you should consider this.
Just like what Anthony has said, there are other ways to pay for long-term care like through combination policies. These are perfect for people who will only need long term care for a limited period of time and prefer to leave something behind to their loved ones once they die.
There are different approaches that can help you finance your future long term care needs and all I can say is that Anthony has done a good job in pointing out the importance of long term care insurance in our lives. Just listen to what he has to say and you’ll definitely come up with a strategy that will protect your assets and as well as your loved ones once the time comes that you’ll require long term care.
LTCI is about love – how much the decision-maker really loves his or her spouse/family. Because long-term care is about love. The spouse/family give up a great deal emotionally and physically. Even the wealthiest of clients’ spouses/families think twice – and more – about incurring the expense of care. “I can do this” – “I don’t need help” – “Let me figure this out myself”. These are the phrases they use because they don’t want to say to themselves or anyone else “I hate to spend the money for something I ‘should’ do myself.” LTCI is a gift one family member gives another. It may be year after year, one time, or mixed in with whatever machinations companies conjure. It’s a “premium” they pay to assure their families’ health and sanity. And they get to benefit from it too if they are the ones who need care.