Long Term Care Insurance in your Retirement Plan

Include long term care insurance in your retirement plan to protect your legacy from rising costs such as the nursing home, assisted living and in-home care.

Roughly 60% of those turning 65 can anticipate using some form of long term care in their lives, according to the U.S. Health and Human Services Department. It may be a nursing home, assisted living, or in-home care.  Long term care insurance is a great way to cover those costs.

CNBC’s recent article, “Not having long-term care insurance can be ‘the single biggest devastator’ of your financial plan,” reports that over 8 million Americans have long term care insurance. However, the cost of that insurance is rising. This increase is because of several factors, including the fact that companies underpriced their policies for years and misjudged how many would drop coverage.

Because of those rising premiums, some individuals may choose self-insurance. That means saving a pool of money to earmark for long term care. Coverage is also available through Medicaid, which has eligibility requirements.

Even with these increases, you should consider purchasing some form of coverage. This is because not being insured can be the biggest devastator of a financial plan.

The rule of thumb has been to buy LTC coverage at age 55. However, it really depends on your situation. The big unknown is health, and the odds of being able to qualify for coverage at age 60, compared to age 30 or 40 is vastly different.  See here for a fuller description.  https://galligan-law.com/when-should-i-consider-long-term-care-insurance/

A traditional LTC policy will cover the costs of care for a certain period of time, generally up to six years. The amount of coverage is based on the average cost of care for your location. Most insurers offer it in the form of a monthly benefit, and possibly with some inflation protection.

There’s also a hybrid policy that covers long term care costs but becomes life insurance paid to heirs, if it’s not used. Of the 350,000 Americans who purchased long term care protection in 2018, 85% chose the hybrid coverage. It’s also called combo or linked-benefit. The big difference is price: you’ll pay more for the hybrid policy.

Medicaid is another option, particularly if you don’t have a way to save. To be eligible, you must meet financial guidelines.  Medicaid also looks back five years into your finances, so if you have given away any money during that period of time, it may be subject to penalty.

Long term care insurance is a great tool to address rising long term care costs in your retirement.  If you don’t have or can’t get a policy that’s right for you, an elder law attorney can help explore Medicaid or other benefit options to cover your long term care needs.

Reference: CNBC (October 14, 2019) “Not having long-term care insurance can be ‘the single biggest devastator’ of your financial plan”

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When Should I Consider Long Term Care Insurance?

Many people haven’t adequately planned for long term care costs. Consider long term care insurance early as a way to cover those costs.

You can bet that you won’t need long term care in your lifetime, but you’ll probably lose that bet: about 70% of seniors 65 and older require long term care at some point. That could be just a few months with a home health aide or it could mean a year (or more) of nursing home care. You can’t know for sure. However, without long term care insurance, you run the risk that you’ll be forced to cover a very large expense on your own.

The Motley Fool’s recent article, “75% of Older Americans Risk This Major Expense in the Future,” says many older workers are going into retirement without long term care coverage in place. In a recent Nationwide survey, 75% of future retirees aged 50 and over said they that don’t have long term care insurance. If that’s you, you should begin considering it, because the older you get, the more difficult it becomes to qualify, and the more expensive it becomes.

If you do not purchase long term are insurance, but need to pay for long term care, there are other options, such as government benefits like Medicaid.  I’ll focus on insurance in this article, but see here for more information about long term care and how to pay for it.  https://galligan-law.com/long-term-care-whats-it-all-about/

Long term care insurance can be costly, which is why many people don’t buy it. However, the odds are that your policy won’t be anywhere near as expensive as the actual price for the care you could end up needing. That’s why it’s important to look at your options for long term care insurance. The ideal time to apply is in your mid-50s. At that age, you’re more likely to be approved along with some discounts on your premiums. If you wait too long, you’ll risk being denied or seeing premiums that are prohibitively expensive.

Note that not all policies are the same. Therefore, you should look at what items are outside of your premium costs. This may include things such as the maximum daily benefit the policy permits or the maximum time frame covered by your policy. It should really be two years at a minimum. There are policies written that have a waiting period for having your benefits kick in and others that either don’t have one or have shorter time frames. Compare your options and see what makes the most sense.

You don’t necessarily need the most expensive long term care policy available. If you’ve saved a good amount for retirement, you’ll have the option of tapping your IRA or 401(k) to cover the cost of your care. The same is true if you own a home worth a lot of money, because you can sell it or borrow against it.

It’s important to remember to explore your options for long term care insurance, before that window of opportunity shuts because of age or health problems. Failing to secure a policy could leave you to cover what could be a devastatingly expensive bill.

Reference: Motley Fool (September 23, 2019) “75% of Older Americans Risk This Major Expense in the Future”

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Why an Attorney Should Help with a Medicaid Application

Seniors should consider medicaid asset protection planning as part of their estate plan.
Hiring an attorney to prepare a Medicaid application may save money in the long run and get your loved one the care they need.

Elder law attorneys can be very helpful when it is time to complete a Medicaid application, and they can save money in the long run, ensuring that you (or a loved one) get the best care. Instead of waiting to see how wrong the process can get, says The Middletown Press, it’s best to “Use a lawyer for Medicaid planning” right from the start. Here’s why.

Conflict of interests. When a nursing home refers a family to people for preparing the Medicaid application or offers to complete it themselves, very often the person has dual loyalties: to the nursing home who refers them the work (or signs their checks), and to the family who will pay them a fee for help with applying for benefits. Whose interests comes first?

Everyone wants the Medicaid application to be successful, but let’s be realistic. It’s in the nursing home’s best interest that the resident pays privately for as long as possible, before going on Medicaid. It’s in the resident or family member’s best interest to protect the family’s assets for care for the resident’s spouse or family.

An attorney has a duty of loyalty only to his client. He also has an ethical and professional responsibility to put her client’s needs ahead of her own.

Saving money is possible. Nursing homes in some areas cost as much as $15,000 a month, in Texas they tend to be cheaper, but still in the several thousands.  While every market and every law practice is different, it would be unusual for legal fees to cost more than a month in the facility. With an experienced attorney’s help, you might save more than her fee in long-term care and related costs.

Further, attorneys can find ways to complete a Medicaid application and successfully obtain benefits without simply spending all of your assets before applying.  Many times nursing home staff will offer to do the Medicaid application after the assets are nearly entirely spent.  A quality elder law attorney will find ways to complete and file a successful Medicaid application while protecting your legacy.

The benefit of experience. It’s all well and good to read through pages of online information (Google, Esq.), but nothing beats the years of experience that an attorney who practices in this area can bring provide.  Any professional in any field develops knowledge of the ins and outs of an area and applying for Medicaid is no different. Without experience, it’s hard to know how it all works.  See Mary’s blog for more detail about how an attorney helps with this process.  https://galligan-law.com/when-you-need-an-elder-law-attorney/

Peace of mind from a reliable, reputable source. Consulting with an experienced attorney about a Medicaid application will help you avoid years of wondering, if there was more you could have done to help yourself or your loved one.

There are multiple opportunities for nursing home residents to preserve assets for themselves and spouses, children and grandchildren, particularly when a family member has long term care needs. However, here’s a key fact: if you wait for the last minute, there will be far less options than if you begin planning long before there’s a need for a Medicaid application.

Reference: The Middletown Press (July 29, 2019) “Use a lawyer for Medicaid planning”

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