By Julian Guilfoyle
When a catastrophic health emergency impacts a family, the last thing anyone wants to think about is the financial implications. Unfortunately, when the family ultimately faces the crisis, they learn their options are limited. There are two ways to prevent a ruinous spend-down when a loved one needs skilled care in a facility, advanced coordinated gifting strategies or long-term care insurance. Contact a qualified elder law attorney regarding the complex rules and regulations surrounding gifting strategies.
Long-term care (LTC) insurance generally cannot be purchased after a health emergency has already occurred, but it can be a wonderful pre-planning tool if the policy is sound. While a growing number of Americans purchase LTC insurance, the majority do not, for a myriad of reasons. First, most of us don’t believe a significant health crisis will ever befall us, or by the time we realize the likelihood of it occurring, we have a pre-existing condition that prevents us from obtaining it. Second, most long term care policies do not contain a death benefit, meaning someone can pay a premium each year of their life and never receive a benefit from it. This is a major hurdle for most people, one that the insurance industry as a whole failed to address for far too long.
Recently however, a new product has emerged that combines the safety net of a long-term care policy while creating an accessible fund that continues to grow and will provide a death benefit to beneficiaries. Those with IRA’s or other tax-qualified plans should especially look into these policies as they can also provide a way to withdraw qualified money with an off-setting tax deduction for health care emergencies. For more information regarding this type of policy or for a free review of an existing LTC policy, please contact our office.
There are many different components to consider when looking at LTC policies; the following are my top five.
What is the daily benefit amount? The average private pay rate, or APPR, for a nursing home is $6,023 a month in the state of Ohio. This translates to roughly $200 per day. If your policy is not going to provide a daily benefit amount of more than $200/day, the difference will be a drain on your assets. In addition, these costs continue to rise each year, which leads me to my second question.
Does the policy have inflation protection? This optional rider helps to protect the insured from the rising costs associated with long term care. Make sure the benefits paid will be sufficient, especially if you’re looking to purchase a plan that most likely won’t be accessed for some time.
What physical settings does the policy allow? While it has almost become an industry standard, older policies may restrict where the benefits will be triggered. Verify that the policy will cover a wide range of settings from care administered in your home by skilled professionals to nursing homes.
Do you have a coordinated long-term care plan? Veterans, when they require the aid and attendance of another, can access a benefit that can pay almost $24,000 a year for care, or nearly $12,000 per year for their widows. This, along with other strategies, if coordinated correctly, can limit the drain on assets.
Does the policy have a death benefit? Frankly, this is tantamount to having your cake and eating it too. Make sure the policy your reviewing provides a benefit should you never access the long-term care insurance.
Although these are entertaining ideas, they are naive at best. You may have read estimates that 70% of all seniors over 65 will require some type of long term care and over 30% will end up in a nursing home at some point in their lives. These are large numbers that are likely to include you and me – and, believe me, the Government is onto your plan to squirrel away money.
