Long-term care insurance is a specialty type of insurance that helps pay for costs that are typically connected with long-term care. This can include items such as care given in a hospital, nursing home services, medical services provided in your home and treatment for dementia. Having Elder Law as one of our major practice areas, Beck, Lenox & Stolzer Estate Planning and Elder Law wants to share what you should know about long-term care. WGN’s recent article entitled “10 Crucial Things to Know about Long-Term Care“ looks at these important items.
- The Biggest Financial Threat. The most significant threat to your financial nest egg is long-term care. About 70% of people over 65 will need some kind of long-term care during their life. The national average for home health care services is $16,743 per month. However, there are ways to manage this without buying a traditional long-term care insurance policy where “you use it or lose it.”
- Long-Term Care Insurance is Really “Lifestyle” Insurance. It’s NOT nursing home insurance.
- Reverse Mortgages. These have become a popular and accepted way of paying for expenses, including the cost of long-term care. Reverse mortgages are designed to keep seniors at home longer. A reverse mortgage can pay for in-home care, home repair, home modification and other needs.
- Using Medicaid to Pay For Long-Term Care. This should be a last resort to pay for long-term care, but it also may be the only way to protect family assets. Medicaid will pay for long-term care, but certain criteria must be satisfied. Beck, Lenox & Stolzer are highly experienced at Medicaid planning and recommends you speak with an elder law attorney before applying for Medicaid.
- Important Considerations When Selecting a Long-Term Care Plan. Four things to consider: (i) go with a company with an AM BEST rating of A+ or better; (ii) the assets of the insurance company should be in the billions; (iii) some long-term care insurers will allow for group discounts through employers, or “affinity” group discounts through a local organization; and (iv) the tax advantages for tax-qualified long-term care insurance plans. At the federal level, premiums for long-term care insurance fall into the “medical expense” category. On the state level, 26 states offer some form of deduction or tax credit for long-term care insurance premiums.
- The Annuity-Based Long-Term Care & The Pension Protection Act. In 2006, this law was enacted to permit those with annuity contracts to have long-term care riders with special tax advantages. The Act allows the cash value of annuity contracts to be used to pay premiums on long-term care contracts.
- Asset-Based Long-Term Care Solutions. The best planning approach for those who choose to self-insure is to “invest” some of their legacy assets so the assets can be worth as much as possible whenever they may be needed to pay for care. If unneeded, the money would then pass to the intended heirs, with no “use it or lose it” issues as with conventional long-term care insurance.
- Long-Term Care Strategy Using IRA Money. Most people use their IRA to supplement retirement. However, sometimes waiting until age 72 when mandatory required minimum distribution rules apply, some people have instead opted to take a portion of their IRA and fund an IRA-based annuity which then systematically funds a 20-pay life insurance plan with long-term care features. This type of IRA-based long-term care policy is unique in the sense that it starts out as an IRA annuity policy, also known as a tax-qualified annuity, and then over a 20-year period makes equal distribution internally to the insurance carrier and funds the life insurance.
- Important Documents for Long-Term Care Planning. Ask an experienced estate planning attorney about a power of attorney for health care and financial power of attorney, as well as an advance directive or living will.
- Using Veterans Benefits to Pay For Long-Term Care. The VA offers a special pension: the Aid and Attendance (A&A) Benefit. This is a “pension benefit” and is not dependent upon service-related injuries for compensation.
What you should know about long-term care could easily fill a book. In fact, both Rudy Beck and Jay Lenox of Beck, Lenox & Stolzer have co-written books on long-term care. You do not need books, however, if you have found a reputable and experienced attorney who practices Elder Law. The right attorney can assess your situation and advise you accordingly.
Reference: WGN (2022) “10 Crucial Things to Know about Long-Term Care“
