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INTRO: In Part One of this series, we discussed how life expectancies are steadily rising and the importance of having a long term care plan. Today we look at some additional common misconceptions about long term care.
Another common misconception is that most people can "self-insure". A very small percentage of people are in that position. In California, decent custodial care often costs $7,000 to $8,000 per month, if not more. Furthermore, many who are able to self-insure don't want to risk diminishing their estate so dramatically as to leave little or no inheritance to their loved ones. If one develops Alzheimer's disease or another form of dementia, a long-term disability could continue for as long as a decade or more. So, it's many hundreds of thousands of dollars, or occasionally in the millions, could be required to cover long-term care needs.
An alternative that should be explored carefully, particularly among successful baby boomers, is buying private, long-term care insurance. Fortunately, many different kinds of plans are available, enabling you to custom-design your coverage as to how long a period you want to cover; the waiting period before coverage starts; the amount per day that can be paid out; whether benefits are adjusted for inflation, etc. There are also "hybrid" plans that combine life insurance and long-term care. Part or all of the premium you pay is sometimes tax deductible (check with your income tax advisor!).
Finally, people who are convinced their budget will not reasonably accommodate long-term care insurance premiums are sometimes wrong. Satisfactory coverage may be available for less than you think. Furthermore, some clever ways to pay for some or all of your premium may be feasible without reducing your current cash flow. For example, you may be in a position to use or exchange coverage for one or more cash value life insurance policies you no longer need; or withdraw funds from a reverse mortgage.
I am not a long-term care expert nor an insurance agent/broker, but I try to stay educated about the subject and I know a number of seasoned long-term care agents in the area. NOTE: Long-term care insurance is not the right solution for everyone; however, it's a shame when people ignore the elephant in the room by failing to even explore their options. "Bottom line", I recommend that you think about the issue; identify your long-term care funding alternatives; and of course, coordinate this with your estate and tax planning.
This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.
Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 125, Walnut Creek, CA 94596; (925) 705-4474; rsilverman@rsilvermanlaw.com.
ESTATE LEGAL SERVICES: Need to find an estate planning attorney in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on Revocable Living Trust, Wills, Durable Power of Attorney, Advance Health Care Directive, Special Needs Trusts, and Irrevocable Trusts & Advanced Estate Planning, including Irrevocable Life Insurance Trust (ILIT), Qualified Personal Residence Trust (QPRT), Defective Grantor Trust (IDGT), Grantor Retained Annuity Trust (GRAT), "Crummey Trust", and various types of Charitable Trusts.