1). HAVE THE GOVERNMENT TAKE CARE OF ME:
Unless you are completely financially destitute this is not going to happen. Medicare does not pay for on-going long term care expenses.
2). HAVE MY FAMILY TAKE CARE OF ME:
Which child or sibling, whose house, and for how long?
3). BUY A LONG TERM CARE POLICY:
There are some well-priced quality policies in the marketplace, which cover all aspects of long term care: Nursing home, care at-home, assisted living, and even adult day care. In fact, there are policies that will cover both spouses, while offering a substantial discount if applied for at the same time; and will even guarantee that the policy becomes completely paid-up at the first one’s death, if certain provisions are met.
If you consider buying a long term care policy, before purchasing make sure you work with an agent who will compare 3 or 4 companies—so you can pick the best one for your particular needs.
4). I WILL SIMPLY SELF-INSURE:
By design, or default, most people prefer to “self insure”, by tucking away some money to help offset these expenses should they occur. This can be a costly mistake for the whole family; but especially to a spouse, if all the assets are depleted on long term care.
5). DO I HAVE ANY OTHER OPTIONS?
Yes! Fortunately new alternative insurance-based products, defined by the Internal Revenue Code as modified endowment contracts, can be financially advantageous in helping with long term care expenses.
A modified endowment contract is a specific type of life insurance policy wherein you make a one-time lump sum payment—perhaps by re-positioning money from another source where you have it, which immediately establishes a death benefit that is worth much more than the amount of money you put in.
But, more importantly, some life insurance companies who offer these modified endowment contracts, permit an advance against your own death benefit to help pay for any future qualifying long term care expenses you might ever incur: home health care, nursing home, or even assisted living.
If you never need the long term care benefits, the life insurance death benefit eventually goes completely income tax-free to your loved ones at your death; or, if you ever want to “quit and run”, you can get all your money back at any time, minus any withdrawals you have made.
So you see, by simply repositioning money you may already have set aside for this contingency, you can transfer much of the long term care liability to an insurance company, and significantly enhance these available funds, which will minimize your own personal financial risk—all without the concern of losing any unused money. Someone always gets the money; either you, or a designated person you name.
SIMILAR OPTIONS:
There are also other comparable products available that do not require a lump sum, but can be purchased with monthly or annual payments. And if you currently have a life insurance policy, whether you are still paying on it or it is completely paid-up, you might be able to upgrade it to one of these new policies; this could also be an easy answer to your long term care worries.
ANOTHER NEW ALTERNATIVE
Let’s consider one more very important insurance-based product, which came into existence due to a recent favorable change in the tax-code. If you have a non-IRA annuity, and a primary purpose of it is to pay for potential long term care expenses, (nursing home, assisted living, or home health care), you will be pleased to know that with the Pension Protection Act/PPA having recently gone into effect, all withdrawals—including all the interest built up— from non-IRA annuities are now completely income tax-free, if they are used to pay for long-term care expenses—if the annuity is PPA compliant.
However, since most annuities are not PPA compliant, because they were purchased before the introduction of this new Internal Revenue Code provision, it would be worthwhile to find out if yours is. If it is not, you may want to consider updating it to one that is, so that you can access your annuity funds completely income tax-free—if they are ever needed for any future long term care expenses.
LONG TERM CARE AND YOU
The possibility of most retirees needing some type of long term care assistance, at some point in their life, is rather compelling. Consequently, utilizing one of these options presented, to minimize these out-of-pocket expenses, may be of financial benefit to you.
WOULD YOU LIKE TO KNOW MORE?
Should you have an interest in more information, or a personalized evaluation of your current long term care planning, please feel free to contact us, without obligation.
*Guarantees are subject to the claims paying ability of the underlying insurance company
