From the book by David T. Phillips, The 10 Most Common Estate Planning Mistakes and How to Avoid Them
According to the Health Insurance Association of America, roughly 70% of Americans over age 65 and 80% of women will require some form of long-term care. If you’re married and over 65, there is a 91% likelihood that one spouse will experience a long-term medical event. With the cost for home care averaging $25 per hour, and the national average annual cost for a nursing home soaring past $100,000 and patients with dementia spending almost twice as much, it is no wonder that having enough cash on hand to cover long-term medical expenses is now the No. 1 concern of retirees. A lengthy illness could wipe out most estates, especially considering that before you can be eligible for government financial assistance for long-term care, you must first “spend down” all of your assets.
Are you prepared to take the chance that your assets will endure the potential costs of long-term illness or an accident? Have you taken any steps to shield your investments from a long-term care event?
My Great Aunt Mary took care of my brothers and me when my mother worked outside the home. She was a wonderful, loving caregiver. Later in life, she suffered from severe arthritis and Alzheimer’s, requiring constant care. My mother and her sister would take turns caring for Aunt Mary, rotating every year. She had a modest estate, but she was proud of what she had put away and made it known that the money was going to my mother and aunt for their benevolent guardianship. The money was to be her legacy and payback.
As her health declined, it became painfully obvious that we couldn’t adequately care for her by ourselves. We needed help. Furthermore, my usually active parents were confined to the house in order to provide the vigilance that Aunt Mary’s condition needed. After months of worrying, the difficult decision was reached: Aunt Mary would be admitted into a nearby nursing home to receive the constant care she deserved. It was a tough choice, but ultimately the best for all concerned.
Then reality hit. Where was the money going to come from to pay for her stay? We were asked to complete a financial statement in which her savings and investments were listed. The nursing home informed us that before Medicaid would give a dime, Mary’s small fortune — Mom’s and Auntie’s inheritance — would have to be used.
Yes, it was a blessing that she had the foresight to save some money for her “rainy day,” but was this what she really wanted? Was her goal to have her assets confiscated in order to qualify for Medicaid’s long-term medical care assistance?
It is estimated that Medicaid is currently paying for 43% of all long-term care. What does that tell us? Most have not properly prepared for this day, this eventuality, and as such, most are required to become an impoverished pauper in order to qualify for government assistance. They have painted themselves into a corner, with no options, other than going to a government-assigned care facility or having family members step in and help.
Before we can even reach that conclusion, consider these alarming factors:
• A spouse is six times more likely to suffer from anxiety or depression if they are the primary caregiver.
• One in four Americans will live into their 90s.
• Four in 10 Americans are or were caregivers.
• One in three caregivers also provide financial support to those they care for.
This end is not my choice, and not my choice for my family and those I love. Even a modest estate needs a plan.
Four simple words: long-term care insurance. If you are relatively healthy and between the ages of 50 and 80, you are an ideal candidate for long-term care insurance (LTCI). The premiums, however, are pricey, are considered an expense, a “use it or lose it” proposition, and underwriting approval can be a significant challenge.
Fortunately, there are a few insurance carriers that are now offering an avant-garde long-term care strategic power move referred to in general as asset-based care plans (ABC), leveraged care solutions (LCS), or hybrid LTC plans.
With the leveraged care solution plans you simply transfer an existing cash asset, either in a lump sum or over a specified number of years from your left pocket into your right pocket and with that transfer, provide the much-needed LTC benefit. At a minimum, if the LTC benefit is never triggered during your lifetime, either your deposit is returned to your beneficiaries at your passing or they receive an increased life insurance benefit. In other words, your transferred cash is still an asset on your balance sheet, and is not an expenditure like traditional LTC insurance.
For more information on leveraged care solutions such as the life legacy/LTC strategy, the LTC annuity option, and the 844 LTC Plan, read The 10 Most Common Estate Planning Mistakes and How to Avoid Them.
This book and others by David T. Phillips are available at the website of Estate Planning Specialists (888-892-1102). David is the CEO of Phillips Financial Services and founder and CEO of Estate Planning Specialists.