Long-term care (LTC) is a real hot button right now, with a large segment of our population beginning to require this type of care and the fears about COVID still running rampant.
Just think, by the time you reach age 65, the odds are a little better than 50% that you will require out-of-pocket long-term care. Those odds are staggering, yet very few people consider planning in advance.
Neither home health care or assisted facilities are cheap. Skilled care facilities can run over $8,000 per month out of pocket! A prolonged stay or supervised care will rapidly deplete the accounts of even the most diligent savers. LTC is an unsolved problem for the majority of Americans and most people have no plan for themselves or their family. Murphy Wealth Management is here to guide you through the maze of long-term care and make sure that all available options and strategies are explored and presented to you and your family.
We all know someone that has experienced a nightmare when attempting to navigate this ordeal for a member of their family, or a friend. It can be intimidating for all involved, but when it’s medically necessary for supervision, there are not many other options available. It will be impossible to provide an accelerated level of care at home.
So, either you planned, saved and protected; or you need to plan on the fly. Wherever you are in this situation, our firm has the experience and expertise to deal with all facets of this phase of life. From negotiating facility billing to applying for Medicaid to creating a strategy to help your family save time and money, we can show you how to get a handle on the situation and at the very least understand ALL your available options. We also incorporate the assistance of our licensed attorney to ensure all our resources are put to work for you and your family.
There are many ways to protect you and your family to ensure you get the care that you need and that your financial legacy remains. From insurance to estate planning, Murphy Wealth Management offers different levels of planning and protection depending on your personal situation.
Like most things in life, the earlier you plan the better! Insurance products and options are designed to pay benefits if you need care down the road. Most are medically underwritten, and will allow you to leverage a single or recurring premium for future benefits.
Below are a few basic strategies to combat the rising costs of long-term care; these are general descriptions of the types of insurance available along with their pros and cons.
Some Options for LTC
- Traditional LTC Insurance
These insurance plans are medically underwritten for morbidity. Premiums are based on age at application and current health. Each plan offers different options and benefit amounts, but these plans can provide a set amount of cash for a predetermined time to pay for long term care expenses.
Pros: Having any type of coverage to assist with out-of-pocket expenses can be a life saver!
Cons: Unaffordable at later ages. Most plans have a 90-day waiting period for payout, a monthly maximum payment with a two- to three-year maximum payout period. Most LTC plans DO NOT guarantee premiums, so as you get older the premiums can and will increase. If you do not need LTC, you paid all the premiums for no return.
What we think: Looking at the evolution of financial and insurance products, these traditional insurance plans can be beneficial for certain situations. However, the largest drawback in our opinion from a financial standpoint is if long term care is NOT needed, all those premiums you paid in are down the tubes.
- Life Insurance with Acceleration of Death Benefit
Unlike traditional LTC policies discussed above that are underwritten for morbidity, life insurance with acceleration of death benefit may be easier to qualify for. These policies are simple and easy to understand. They are structured like a regular life contract with a guaranteed level premium for a level death benefit.
The big difference is the death benefit can be accessed while you are alive to pay for qualified costs.
Pros: You can use this plan in a variety of ways: 1) Traditional death benefit if you pass away, 2) Access to death benefit if you suffer a qualifying illness or medical condition, and/or 3) Access to tax-free cash value in form of a policy loan. Another pro is their versatility and the knowledge that you won’t dump money into something you will not ever use.
Cons: Like all plans that cover LTC, they get really expensive the longer you wait to apply.
What we think: The one thing we always tell our clients when it comes to life insurance: we can’t change your age…if we could, we would not be here talking about insurance. We can, however, lower the benefit amount to fit your budget. Once your policy is issued, it is locked in. Premiums will never increase and the benefit will never decrease.
- Hybrid LTC Insurance
These plans are funded by a one-time premium that “purchases” a certain amount of benefit. Some insurers not only guarantee a certain amount each month of cash for you to pay for care if you need it, but some insurers guarantee LTC payments for your entire life. Some of these plans also offer return of premium if you don’t use the benefit. For certain individuals these plans make a lot of sense to safeguard the rest of their portfolio.
Pros: One-time payment and your protection plan is funded to your desired level. Funds designated to provide benefits can have inflation protection and some have index crediting methods to earn interest linked to market performance with no downside risk.
Cons: If a single payment is not feasible, then this type of plan is not an option. Access to your cash value could be restricted in certain plans.
What we think: Some people hedge their investments or purchase options as insurance for their investments, these single premium hybrid policies can provide protection for your portfolio from another possible threat…the cost of long-term care. Not having a recurring premium with a one-time payment is another bonus if it is possible.
Medicaid is one of the most important programs in America when it comes to long-term care, but is often the most misunderstood. Terminology like “mandatory spend-down,” “5-year look backs,” and “asset transfers” can strike fear in the heart of even the most astute. We don’t think of things like LTC and Medicaid when we are young and healthy…why would you? Most people start learning after being thrown in the fire, and that can be terrifying.
The Medicaid program was enacted in 1965 and designed to provide medical assistance like LTC to those who meet the eligibility requirements. Low income and few to no assets will likely meet these requirements. If you can avoid needing Medicaid by having other options in place, that is best.
For those that don’t meet the criteria when care is needed, it becomes a scramble to fit a financial square peg in a round hole to qualify. With the astronomical cost of LTC, many families take a crash course in maneuvering assets and estate planning in an attempt to get a loved one qualified for the program without losing everything. The question becomes are you going to have time to learn all the nuances of Medicaid to ensure you are taking the right steps?
With the assistance of In-House Counsel, we assess our clients’ individual situation and recommend a course of action. Not every situation has a perfect solution when it comes to LTC, but understanding your options can give you the information to take the next step. At MWM, we have a personal and professional interest in helping people make sense of this confusing and emotionally charged situation. It’s hard and we know it.
The financial thresholds are extremely low for a single person requiring care
For many people, Medicaid is the only solution for long term care. Joe Murphy is a licensed Indiana Navigator and can assist our clients with the application process at no charge.