The Cost of Long-Term Care
Everyone has a long-term care story. If it hasn’t happened in your own family, you likely know someone who has been affected by the cost of a serious medical condition or a move to an at-home care or assisted living facility.
You may have seen the toll this can take on loved ones. As an advisor, we must consider the impact a long-term care event could have on your family when reviewing your retirement readiness.
There are a lot of misconceptions in the marketplace about paying for long-term care costs and a growing number of new options to help fund that care. The right solution can give you flexibility and control while potentially reducing the emotional and financial stress associated with making life-event decisions.
Some questions you need to consider:
How would you and your family handle an unexpected change in your health
What asset would you sell first to pay for long-term care?
Would you prefer staying in your home if you had a LTC event?
Are your wills, powers of attorney and beneficiary designations up to date?
Some of the most important conversations with your loved ones are not the easiest, yet they have meaningful outcomes. Long-term care is a topic many people want to avoid, but a long-term care event doesn’t just happen to a person; it affects the family.
Having a long-term care conversation as a family can be a life-changing event. It’s something that everyone should be doing as part of their retirement strategy because it can lead to a better future for you and the ones you love.
However, you need to know the facts as it’s not uncommon to be confused about long-term care. Unlike medical care, long-term care is assistance with everyday tasks, including eating, dressing, bathing, using the toilet, helping with incontinence, and moving to and from a bed or a chair. Long-term care assistance can also include housework, cooking, administering medications, grocery shopping, and managing money.
Most people have some misconceptions about long-term care. To learn more about some of the myths surrounding long-term care planning and some of the questions you should ask yourself before meeting with an advisor, please request the report "4 Myths of Long-Term Care Planning" by completing the following information and clicking Submit.
In the long run, traditional LTC insurance is the most economical option when considering paying for a LTC need. However, many consumers are uncomfortable with the insurance company’s ability to raise annual premiums, as well as the fact that you could be paying for something you may never need.
The long-term care insurance (LTCi) product landscape has changed dramatically over the past decade. Today, consumers have more options and in particular, Asset Based LTCi. LTCi with a life insurance or annuity chassis is one of the more popular options and a good fit for many to use to meet their planning objectives.
Asset Based products offer many advantages to consumers that traditional LTCi products don’t. These include day-one return of premium, no “use it or lose it” risk, tax-free benefits (living and death), no future rate increases and flexibility in contributions and benefits. They also provide consumers an opportunity to create a plan that is priority-driven and supported by contributions from asset reallocation or cash flow. However, probably the most important benefit of ABLTC is the opportunity to receive 2x to 3x your money to spend on paying for a LTC event, and it's all tax-free.
Potential Sources of Funding:
Asset-Based LTC products accept funds from a wide range of sources to accommodate planning objectives. To make a suitable product recommendation requires an assessment of a client’s insurance holdings, assets within portfolios and cash flow/income plans.
Cash or Cash Equivalent:
Use dead assets or assets your clients set aside for rainy day funds or those they aren’t using for income.
Cash Value Life Insurance:
An insurance review is a great place to start looking for sources of funding. FIG’s CAR Program can do this for you on any inforce permanent life policy. It is important to review a client’s in-force insurance plan as a potential source of funding (cash value). In addition, some life insurance products contain living benefits including critical, chronic and terminal illness. Some annuities contain provisions for LTC needs.
The Pension Protection Act (PPA) authorizes the transfer into PPA compliant LTC annuities for triple tax efficiencies: (1)Tax free transfer (2)Tax free deferral and (3)Tax free distribution for LTC benefits. Most carriers with LTC annuities will offer additional leverage to increase the benefit pool. This option is great for highly appreciated annuities.
Annuities are one of the most underutilized assets for clients to leverage for LTC. Not only is it possible to reposition qualified and non-qualified annuities using a 1035 exchange into an asset-based solution, you can also use one spouse’s individually owned asset to cover both spouses using a variety of strategies.
RMD Strategies and Qualified Savings:
Using RMD strategies to fund LTCi plans is common among financially stable retirees who recognize they are not dependent on any/all of their qualified savings to support their lifestyle.
Leveraging an LTC strategy with current/future cash flow might be a viable alternative. An LTC plan designed with systematic contributions is a helpful method to fund traditional LTCi plans.
Older Life Insurance Policies & Annuity Contracts Reviews
We recommend reviewing older life insurance and annuity policies to see if they provide living benefits, are outdated, or underperforming. These policies may enable you to leverage account values and plan contributions to implement a Care Planning solution. We offer a complimentary analysis and review on any permanent, inforce life insurance or annuity policy to assess whether the policy is in good standing and/or present efficiencies as appropriate. Please see the Reviews tab for more information.
Let’s discuss how we can help protect your retirement assets when paying for long-term care expenses and empower you with confidence about the future.
To further discuss these opportunities please email me or give me a call and I will respond as soon as possible.