Long-term care assistance—
What arrangements have you made for this potential need?
By Raymond L. Adams, CFP®, CLU, ChFC
Your considerations might include:
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.
HAVE MY FAMILY TAKE CARE OF ME: Which child or sibling, whose house, and for how long?
I WILL SIMPLY SELF-INSURE: By design, or default, some people “self-insure”, by tucking away some money to help offset these expenses should they occur. This can be a costly mistake for a family; and perhaps even more so to a surviving spouse, if all the assets have been depleted.
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.
Before purchasing a long term care policy, consider reviewing various companies—so you can pick the best one for your particular needs. A good agent can help you with this.
ALTERNATIVE INSURANCE-BASED PRODUCTS: Some insurance companies offer a product called a modified endowment contract, which 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, it provides an option for 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 enhanced life insurance death benefit eventually goes completely income tax-free to your loved ones at your death. Some policies provide what I call a: “quit and run”, wherein 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 having significantly enhanced these available funds, 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 OPTION: 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 concerns.
THE NEWEST ALTERNATIVE: If you have a non-IRA annuity, a PPA compliant annuity could allow all withdrawals, including all interest built up, to be completely income tax-free, if the withdrawals are used to pay for long-term care expenses. Contact me for a free review.
If you purchased your annuity before the introduction of this new Internal Revenue Code provision, you may want to consider updating it, so that you can access your annuity funds completely income tax-free—if they are ever needed for any future long term care expenses.
WOULD YOU LIKE TO KNOW MORE? The possibility of most retirees needing some type of long term care assistance, at some point in their life, is rather compelling. Should you have an interest in more information, or a personalized evaluation of your current long term care planning, please feel free to contact me, without obligation: (425) 827-9225
Capital Enhancement Group, Inc. • 611 4th Ave. Suite A • Kirkland, WA 98033 • (425) 827-9225