Column: Long-term care insurance as part of an estate plan

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.