Estate Planning/Elder Law- Long Term Care

A. Long Term Care

  1. Average nationwide cost of long term care exceeds $94,000
    1. Exceeds $250,000 in some major metropolitan areas
  2. Americans living longer (not necessarily living better); cost of care increasing; not only a “senior” issue
  3. Who is a senior, depends who you ask
  4. 68% of those over 65 will become cognitively impaired or unable to complete 2 out of 5 ADLs during their lifetime
  5. Of those who enter nursing home, 50% will stay on average 2.5 years, 10% will stay more than 5 years
  6. Medicaid is payer of last resort
  7. Where?
    1. Home
      1. Preference for most
      2. Costly
      3. Risk of Abuse
    2. Assisted living or CCRC
    3. Nursing Home
  8. Who decides?
    1. Does client have capacity?
    2. Is cost a factor?

B. Long-Term Care Insurance

  1. Many companies have exited the LTC market or scaled back their products
  2. High capital requirement
  3. Low interest rates
  4. Low lapse rate
  5. Life expectancies
  6. Health care costs
  7. Uncertainty regarding future claims
  8. LTCI prices increased 9% this past year
  9. More conservative underwriting
  10. Tougher approval process
    1. More scrutiny re: existing medications
    2. Tougher to qualify for best rates
  11. Higher costsEspecially for women
    1. Historically gender neutral
    2. Live longer
    3. No caregiver at home
    4. Now as much as 40% higher
  12. Hybrid products
    1. Hedge your bet
    2. Annuities
    3. Life Insurance
    4. Many are single premium
  13. Partnership policies
    1. Available in 40 states
    2. Dollar for dollar/total asset protection
    3. Income not protected

C. Deductibility of LTCI Premiums

  1. Age 40 or less – $380
  2. Over 40-50 – $710
  3. Over 50-60 – $1,430
  4. Over 60-70 – $3,800
  5. Over age 70 -$4,750
  6. State tax credit or deduction
  7. 10% medical expense threshold
    1. 7.5% if 65 or older (until 2017)
  8. C Corporation

D. Tax Treatment of Benefits

  1. Benefits received under a qualified LTC policy are not considered taxable income
  2. Tax-free cap of $330/day applies to indemnity policies

E. Long-Term Care Insurance

  1. Evaluate existing policies
  2. Suggest healthy clients/family consider
  3. Determine need
    1. Client goals
    2. Asset risk
    3. Avoid family disputes
  4. Work with reputable agents
  5. Assist in policy design and benefit level
  6. Determine payment source
  7. Third party lapse notification

F. LTC Strategies

  1. Self insure
  2. Insure part of the cost/Medicaid planning
  3. Create an income stream
  4. Purchase LTCI for parents
    1. Parents can stay at home
    2. Tax benefits
  5. Reverse mortgage
  6. Second to die life insurance
  7. Accelerated life insurance benefits
    1. State regulated
    2. Monthly or lump-sum
    3. Insured must be terminally ill or suffering from long-term chronic illness
    4. Usually done when life expectancy is short
    5. Not subject to federal income tax
  8. Life settlements
    1. Sale to a third party

Reference: Bernard A. Krooks, Planning For An Aging Population, Philadelphia Estate Planning Council

Filed Under: Estate Planning, Elder Law, Long-Term Care Insurance

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