Long-term care is expensive. It is expensive emotionally, physically and financially. If the contingency of needing long-term care is not addressed, any planning you do for the future is incomplete.
Jane Bryant Quinn, in her article “Insuring Your Future Care” in the June 18, 2007, edition of Newsweek, sums up the cost problem. “Nursing homes charge about $75,000 a year for a private room with home-health aides clocking in at $19 an hour. How would you pay?”To quote Stuart H. Shapiro, MD, in an article from the May 7, 2007, edition of The Philadelphia Inquirer, “Our Country’s Retirement Pillars – Social Security, Medicare and Medicaid – Are Crumbling”: “Simply put, we have no means of paying for the long-term care needs of the nation’s 77 million baby boomers who begin turning 65 in four years.” Shapiro goes on to say that a report in the Congressional Quarterly said nearly 70 percent of those turning 65 this year will eventually need long-term care. “We need to lay greater stress on the individual’s responsibility for his or her own care with special attention to planning,” he adds.
to Address Long-Term
There are several logical times in a family life cycle that long-term care planning may be addressed. The difficulty for families, sometimes, is in realizing that these times are opportunities for this planning and to take advantage of them. As the public becomes better educated and aware, advisors, such as attorneys, financial planners, trust officers and CPAs, can play a significant role in elevating awareness and underscoring the profundity of this family issue.
Employers can also play a significant role by providing quality education opportunities for employees and their families. This can be through seminars, learning lunches, newsletter articles and employer-sponsored long-term care insurance programs.
Marriage and divorce. Couples may be offered significant discounts when applying for long-term care insurance together and, depending on the age of the couple when they marry, long-term care planning can be less or more of a priority; the older the couple, the greater a priority it should be. A rule of thumb to follow is to lock in this age- and health-sensitive premium by age 45.
For couples who are laying out their future plans, establishing a long-term care insurance policy, along with writing or rewriting wills and acquiring life insurance, is a financially smart thing to do. It is a wedding gift that is a lasting gift not only to each other but to family members who might also have care responsibilities if one or both partners should need long-term care.
And what if the marriage does not last? If the long-term care insurance has been established, it can make the split less financially complicated as one piece of a potential financial settlement is already in place. And, if in the future one partner suffers health problems requiring care, it may alleviate guilt and family turmoil to have in place the funding necessary to pay for that care. This is especially true if there are children who would be burdened with long-term care responsibilities for a single parent. In most cases, the significant reduction in cost for having taken out the policy while married can continue through divorce and widowhood.
Divorced and planning to remarry? Don’t think about it if you haven’t discussed long-term care with your intended. Especially if there are children from the previous marriage, planning needs to happen before that second or third marriage. If the couple is not mature enough to do that, they have no business getting married again. Hopefully, there was a long-term care insurance policy that was a part of the divorce settlement. If not, the best post-divorce gift you can give yourself and your family is a long-term care insurance policy. And it becomes a part of the dowry that you bring to the next relationship. It certainly facilitates the prenuptial long-term care planning discussion when one party already owns a policy.
Special birthdays. “Lordy, Lordy, Look Who’s Forty,” “Over the Hill” Fifty, “Sweet Sixty” and the “Magic Sixty-Five” should all be times to visit and revisit long-term care planning. What is your plan? What has changed to affect a previous plan? Have you funded your plan either by building enough assets or acquiring long-term care insurance? How is your health? Maybe it is someone else in the family, for whom you would have responsibility, who is having a special birthday. Find the right moment (not when they are blowing out the candles on the cake), and help them plan. Never forget that long-term care is a family issue.
Going into the military. It is not uncommon in this day and age that proud families have members in the military: “Our son is a career Marine officer.” Military families, including spouses, parents, aunts and uncles, feel proud – and helpless. We send our positive thoughts and prayers, but they have placed themselves in the hands of “Uncle Sam” and there is not much else for family members to do. Right?
Wrong. That special person who has put themselves in harm’s way to protect our American freedom and way of life could have a long-term care insurance policy. If something does go wrong, do you expect that “Uncle Sam” will do everything to help the pieces of a life be put back together? “Uncle Sam” and your tax dollars will do a lot, but only to a point.
Long-term care insurance policies are still available without War or Acts of War exclusions. A meaningful gift a family can provide for that special military member is a long-term care insurance policy. Let’s hope they come back in one piece and, if it is their desire, someday go on to a non-military life. However, the family can provide extra protection during their extremely vulnerable years and a lasting valuable gift of appreciation through the rest of their life.
Death. Whether you experience the death of a parent or a spouse, this time of adjustment and reevaluation should include reviewing options for your long-term care. If there is an inheritance, from parents or a spouse, perhaps this is an opportune time to have “found” the money to pay for long-term care insurance.
Owning a policy can function as a safeguard so that a portion of the inheritance is more predictably available to your heirs. It can also make your planning for retirement more exact as you have, at least in part, defined the cost of potential long-term care needs.
Retirement reality planning. Are you hoping to retire at 55, 65 or later? Whatever your intention, Fidelity’s Guy Patton has said, “A couple in their mid-60s will spend an estimated $215,000 on out-of-pocket medical expenses, excluding long-term care, by the time they’re 85.” So, when you reach that milestone when you are earnestly beginning to plan to retire, you should not forget to plan for the potential expense of needing long-term care.
Birth of grandchildren. The milestone of grandchildren joining the family circle is one of the best things that life has to offer. It is also an opportune time for long-term care planning. Now your children have their own children as their first responsibility. It is a precious gift to them and your grandchildren if you have done responsible planning for yourself regarding long-term care. Your children will be a sandwich generation, but you want them to be able to oversee your care if necessary, not have to pay for it or provide it themselves.
Perhaps grandparents, after doing their own planning, could provide assistance to the new parents by helping them establish their own long-term care insurance policy. It is a significant gift for new parents to have a long term care plan in place while they are relatively young, healthy (and still married). Since the IRS considers long-term care insurance premiums health insurance premiums, the gift of paying the premiums can be in addition to any gifting program, which allows up to $12,000 to be given by an individual to another individual in any one year without tax consequences. [Note: The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.]
There are many family milestones. Consider what is happening in your family’s life and make use of a milestone as a catalyst to do responsible planning for long-term care for you and your family.
Sally H. Leimbach, CLU, CEBS, CLTC, is a Long-Term Care Insurance Specialist with FranklinMorris, Coordinating Broker for the Bar Associations Insurance Agency, Inc. For more information on insurance benefits available to MSBA members, visit our website at: www.msba.org/departments/membership/baia/franklinmorris.pdf.