I became a financial planner in 2001 and have
worked in banking and financial services since 1995. Since the beginning,
long-term care (LTC) has been a touchy subject with many of my clients because
of the costs and believing it would never affect them. Long-term care has
always been a part of the financial-planning process, but it is more important
now than ever before. With health care and LTC costs on the rise, not planning
for this likely event could put you and your family in financial peril.
Having dealt with LTC first-hand with my own
parents, and even with all the financial issues taken care of, I have come to
realize that there is no possible way to plan for the emotional roller coaster
when the situation arises. If your financial plan is not in place to deal with
this possibility, the compounding effect of high costs and emotions could wreak
havoc on both your mental and emotional health, as well as your bank account.
However, the good news is that there is good
news. You can mitigate the emotional stress by having your estate and financial
matters all in place. The focus of this article is to identify why people
choose not to deal with possible LTC issues and some basic steps to getting a
plan in place.
“The Bad”: The Old Way of Thinking
When faced with a potential LTC situation,
some of the views and thoughts used to, and could still, be:
·
Medicare will pay for
my long-term care expenses.
·
My children will take
care of me.
·
We can gift away our
assets quickly so we can qualify for Medicaid.
·
I’ll never need
long-term care.
So, if the need ever arose, people dealt with
long-term care risks by relying on family, self-insuring, or buying expensive
LTC insurance.
“The Ugly”: Long-Term Care’s New Reality
As more baby boomers are starting to reach retirement
age, long-term care is becoming a reality for a lot of people and their aging
parents. With recent law changes over the last 10+ years, no longer can you
afford to ignore the facts:
·
70% of retirees will
need long-term care at some point.1
·
The national average
cost of nursing care in 2017 was $7,148 to $8,121 a month.2
·
Medicare does not pay
for long-term care.3
·
Medicaid only steps in
when you become financially destitute.
·
The Medicaid look-back
period in most states is now at 60 months to recover transferred assets.4
·
Long-term care
expenses can erode a lifetime of savings.
·
Children are often
incapable of assuming care duties.
·
Long-term care
premiums can increase.
While some of this data is ugly and can be
intimidating, there’s still some good news.
“The Good”: Planning for the Road Ahead
The good news is you can develop a plan that
will help you down the road. It may seem daunting, but here are a few tips to
help plan and prepare for long-term care costs.
1. Take inventory and plan for the
future.
Start by taking inventory of your “stuff,”
which can (and should) include your current assets, your current spending
needs, and a projection of your future spending needs, for starters. From
there, you can begin to create a basic road map of how much you might need.
2. Find out the details of your plan.
Once you have a basic plan, find out how much
LTC insurance you will need and what type of LTC plan you want. To do this, you
should explore the differences between traditional LTC insurance and using life
insurance with an LTC or chronic care rider. When doing your research, find out
the cost difference and how it is paid out. (Is it reimbursable coverage or a
declared benefit?) Do you have to pay the cost up front, submit for
reimbursement and you’re reimbursed based on your policy provisions? Or, once
you have met 2 of the 6 ADLs (activities of daily living: eating, bathing,
dressing, continence, toileting, transferring), can you receive your declared
benefit upfront? Also, for homecare, you should check and see if your family
members be paid to take care of you, or will they pay only certified and/or
licensed caregivers? If you never use the insurance, what happens to the
premium? Do you lose it, or will it get passed to your heirs and beneficiaries?
These are all very important details to know.
3. Find an estate planning attorney.
Meet with an attorney who focuses on estate
planning and elder care and understands the laws in your state to help protect
what’s important to you.
Since Medicaid is a federal-state matching
entitlement program that pays for medical assistance for certain individuals
and families with low incomes and resources, rules and laws can vary by state.
4. Choose your power of attorney.
When choosing your power of attorney for your
health care directives/living will or finances, most attorneys will recommend
picking only one person with contingents for backup — having more than one
could cause conflict, making it difficult to have your wishes followed. Also,
talk to your family and friends, share your wishes and how you want things
handled. This will help to prevent disagreements and conflicts that could
permanently affect your family.
5. Find a seasoned professional.
You can do a lot of this yourself, but it may
be beneficial to work with a professional with a focus on retirement planning.
If you do, make sure they are a fiduciary to ensure they have your best
interest at heart.
Whatever you choose to do, the most important
thing is to act. Be proactive in your total planning process, do your homework,
and share your plan with your family.
This content was brought to you by Impact
PartnersVoice. The information is not intended to be used as the sole basis for
financial decisions, nor should it be construed as advice designed to meet the
particular needs of an individual’s situation. EGSI Investment Management. Inc.
does not offer legal or tax advice. Please consult with your attorney,
accountant, and/or tax advisor for advice concerning your particular
circumstances. Investment advisory services offered through EGSI Investment
Management, Inc., a Registered Investment Advisory firm registered with the
state of Ohio. Insurance and annuities offered through EGSI Financial Services
Inc., OH license #1020619. DT006417-0120
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