Is Long Term Care Insurance Really a Good Idea?

Clients are often concerned that long term care insurance is too costly, but it may not be compared to the cost of private paying long term care.

Forbes’ recent article entitled “Is Long-Term Care Insurance Right For You?” says that a big drawback for many is the fact that long term care insurance (“LTCI”) is expensive. However, think about the costs of long term care. For example, the current median annual cost for assisted living is $43,539, and for a private room in a nursing home, it’s more than $92,000.  In many urban areas it is much higher, so utilizing long term care insurance my be best.

Another issue is that there’s no way to accurately determine if in fact you’ll even need long term care. Much of it depends on your own health and family history. However, planning for the possibility is key and unfortunately most clients don’t plan for long term care either with insurance, retirement or in their estate plans.

Remember that Medicare and other types of health insurance don’t cover most of the cost of long term care—what are known as “activities of daily living,” like bathing, dressing, eating, using the bathroom and moving. Medicare will only pay for medically necessary skilled nursing and home care, such as giving shots and changing dressings and not assisted-living costs, like bathing and eating. Supplemental insurance policies generally don’t pay for this type of care.  Those who meet financial guidelines may receive care provided under Medicaid or other benefits such as Veterans benefits.

It is important to shop around as there are no one-size-fits-all long term care insurance policies. Check the policy terms and be sure you understand:

  • The things that are covered, such as skilled nursing, custodial care, assisted living and in home care
  • If Alzheimer’s disease is covered as it’s a leading reason for needing long-term care
  • If there are any limitations on pre-existing conditions
  • The maximum payouts, including if maximum payouts are by day or year
  • If the payments are adjusted for inflation, which depending on the time of purchase might be key
  • The lag time until benefits begin
  • How long benefits will last, including whether there are lifetime caps on the amount paid or time periods paid
  • If there’s a waiver of premium benefit, which suspends premiums when you are collecting long-term care benefits
  • If there’s a non-forfeiture benefit, which offers limited coverage even if you cancel the policy
  • If the current premiums are guaranteed in future years, or if there are limits on future increases
  • How many times rates have increased in the past 10 years
  • If you purchase a group policy through an employer, see if it is portable (if you can take it with you if you change jobs).

Typically, when you are between 55 to 60 is the most cost-effective time to buy LTCI, if you’re in good health. See my prior blog on this point.  https://www.galliganmanning.com/when-should-i-consider-long-term-care-insurance/   The younger you buy, the lower the cost. However, you will be paying premiums longer. Premiums usually increase as you get older and less healthy. There’s a possibility that you’ll be denied coverage, if your health becomes poor. Therefore, while it’s not inexpensive, buying LTCI sooner rather than later may be the best move.

The best thing to do is to consult your financial advisor and your insurance agent on whether a LTCI policy, and which, will work best for you.

Reference: Forbes (April 17, 2020) “Is Long-Term Care Insurance Right For You?”

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What Do We Know about Early-Onset Dementia?

There is an increase in early-onset dementia cases which presents unique issues for families. Consider early testing and long-term care insurance to help.

Rita Benezra Obeiter, 59, is a former pediatrician who was diagnosed several years ago with early-onset dementia, a rare form of the disease. When this occurs in people under age 65, the conditions cause additional and unique issues because they are so unexpected and because most of the potentially helpful programs and services are designed for and targeted to older people.

One issue is that doctors typically don’t look for the disease in younger patients. As a result, it can be months or even years before the right diagnosis is made and proper treatment can start.

WLNY’s recent article entitled “Some Health Care Facilities Say They’re Seeing More Cases Of Early-Onset Dementia Than Ever Before” reports that her husband Robert Obeiter left his job two years ago to care for her. She attends an adult day care, and aides help at home at night.

If Dementia is a generic term for diseases characterized by a decline in memory, language, and other thinking skills required to perform everyday activities, Alzheimer’s is the most common. The National Institute of Health reports that there’s approximately 200,000 Americans in their 40s, 50s, and early 60s with early onset Alzheimer’s.  These numbers have lead to the consideration of Alzheimer’s legislation.  See here.  https://www.galliganmanning.com/elder-law-community-follows-proposed-new-alzheimers-legislation/ 

One conference discussed a rise in early dementia because of the processed foods and fertilizers or the other environmental hazards, and there are definitely some genes more associated with Alzheimer’s—more so with early onset.  There is no clear answer, and most of the treatments help to slow down the progression.

There is some research showing the Mediterranean diet can be protective, as well as doing cognitive exercises like crossword puzzles and Sudoku.

It’s true that no one can predict the future of their health, but there are ways financially that families can prepare for early-onset dementia. It can cost $150,000 a year or more. That’s why you should think about purchasing long term care insurance starting at the age of 40.  You should also have your estate plan reviewed well before memory becomes a significant issue to make sure the plan facilities long-term are planning.

Long-term health insurance can pay for an aide to come into your home, and it can pay for the cost of assisted living. And, remember that health insurance doesn’t cover long-term care, nor does Medicare.  Making sure you have a financial power of attorney prepared by an elder law attorney will provide your family with the flexibility they need to handle your financial needs, bills and so on.

If you are faced with this condition or have a family history of it, consider long-term care insurance early and make sure to review your estaet plan every few years to stay up to date.

Reference: WLNY (Feb. 12, 2020) “Some Health Care Facilities Say They’re Seeing More Cases Of Early-Onset Dementia Than Ever Before”

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How do I Help my Parents with Money Problems

Today many people are taking care of parents. Having a discussion and boundaries between parent and child, as well as seeking professional advice, can help.

According to a 2019 study by the Transamerica Center for Retirement Studies, 8% of Gen Xers and 3% of Boomers say supporting their parents is a top financial priority in their lives.  Similarly, a study from TD Ameritrade found that 13% of Americans are supporting a parent, including 19% of millennials.  With so many individuals taking care of parents, it is important both everyone to be prudent

Next Avenue’s recent article entitled “When Your Parents Need Financial Help” says that if this is a financial priority for you, try a respectful approach to see the extent of your parents’ money issues and what you might be able to do to help.

There is one financial issue that your parents may have. They may have failed to set aside money for long-term care, because of their debts.  Ideally they would start planning well before they are dependent, but there is no time like the present to address a problem.  For long-term care assistance, ask an elder law attorney for help. We can investigate your parents’ eligibility for Medicaid or other benefits to help pay for care.  This article has a much fuller overview on those issues.  https://www.galliganmanning.com/long-term-care-whats-it-all-about/

However, before you jump in with both feet, consider your own money situation. Remember your own finances come first, because it you don’t, you risk your own finances by overcommitting. Therefore, if you can afford to help them, you have to establish boundaries. If you have siblings, bring them into the discussion and ask about sharing the responsibility. After you figure out to what extent you can afford to help financially, reach out to your parents — with care. You don’t want to come off as criticizing or judging them for making financial mistakes or bad financial decisions.

It’s important to begin the conversation early when taking care of parents, especially financially. You also may want to refer your parents to a financial planner or to a credit counselor. If housing is a major expense, it may be time for your parents to downsize to a more affordable home. You can also look into having them move in with you.  If not a topic of discussion, perhaps you’re able to review their expenses to see what they can cut and help them find ways to improve their financial situation. You should also look into federal, state, and local resources, like benefits for which your parents may be eligible.

It may be an issue of diminishing capacity and worth discussing with your parents’ doctors.  I once had a client who almost overnight spent thousands of dollars on QVC.  She spent because it was on TV and had no concept of how much she purchased or how much she spent.  Having family involved before hand may help eliminate or reduce those issues.

After you’ve delved into all the resources, and you’re also ready to help your parents financially, make sure you incorporate all of this into your own financial plan. Instead of handing your parents cash or a check to pay outstanding bills, pay the bills yourself. This will allow you to be certain that the money is actually used for the bill, rather than something else.  You can best accomplish this as the agent for your parents under a power of attorney or as trustee of their living trust.

Many people taking care of parents also choose to provide for their parents in their estate plans. It is very common to do so, but if you do, consider leaving assets to your parents in a trust, such as a supplemental needs trust.  That way, they receive the benefit of the money while protecting assets, preserving Medicaid eligibility and avoiding many of the problems this article is addressing.

Ensure that your parents know that you have their best interests at heart, when assisting them with long-term care. Be respectful of your parents and tell them you’re not trying to take over.  Taking care of parents doesn’t have to be a fight, it should be about everyone helping each other.

Reference: Next Avenue (Jan. 30, 2020) “When Your Parents Need Financial Help”

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