Long Term Care Strategy
"Recently, I was asked, “What was the most important tax planning issue that professionals should be discussing with their clients this year.” For me, the answer was easy. Long-term care strategies." - Katherine Nixon
How do I express all that I know and understand in just a few words? The experts say don’t quote statistics. Yet, it is those statistics that make it so compelling for most everyone to consider long-term care insurance. We insure our cars and our homes for couple of thousand dollars a year to protect against losses that may be in the tens of thousands. Yet, a couple thousand dollars a year could provide for long-term care costs that average hundreds of thousands of dollars.
These statistics are if you need long-term care today. If you are in your 50s and need long-term care in your 80s, the costs could reach a million dollars. Today, less than 10% of Americans share this risk with an insurance company. Yet, it is said that over 40% of Americans will need this type of care in their lifetimes. For me, it begs the question why doesn’t everyone at least consider long-term care insurance? Working to retire and retiring well can be a challenge. Retirement planning should include a discussion about the role of long-term care insurance protection for all individuals, but especially affluent and business owning clients.
Individuals and Couples:
First Things First, Consider purchasing HSA health insurance. Through your HSA, your long-term care insurance premiums are tax-deductible up to the Federal limits listed below.
Long-Term Care Insurance (LTCi) today is more than just tax deductions and nursing home coverage. Long Term Care Insurance provides a stream of benefits that allows you to live at home for as long as possible. LTCi protects retirement savings and income streams allowing fuller lifestyles longer. It provides help to preserve your spouse’s and children’s physical and emotional health. LTCi premiums can be paid from Health Savings Accounts (HSAs).
In addition, for everyone who purchases long-term care insurance, benefits paid are generally received tax-free. LTCi is difficult or expensive to buy after a major health change. LTCi offers better rates to individuals who are in good health. LTCi offers lower rates to younger people and allows you to choose how well and how long you live at home independently.
It is All about Priorities, Health, and Choice and Control.
If you can afford long-term care insurance, you should buy it and buy it early in life while you still have your health to qualify. Although it seems young, 45-55 are the best ages to obtain this coverage because health issues generally start arising around 50. Children should consider purchasing insurance for their parents especially when you do not live close or have siblings that you would like to remain friends with through these health challenges.
If you do not have LTCi, you could be placing an undue burden on your spouse, children, and friends if they need to take care of you in your old age or after a crippling incident. This burden often falls to the one person that you would least desire to ruin both financially and physically. It can make them a prisoner in their home or yours and can greatly affect their health as well.
The need for extended care can happen any time in our life with a serious illness or accident. If it happens today, how will you pay for the costs?
Consider buying a fixed annuity or second-to-die whole life insurance policy with funds that equate to three years’ care in today’s dollars and add a rider that provides for long-term care costs up to a lifetime of coverage at guaranteed never-to-increase premiums. This allows you to self-fund a portion of their long-term care costs and yet, still build a fence around the rest of their assets allowing assets preserved for other priorities. You will only have to answer a minimum of questions and often, no exams are needed.
Consider purchasing long-term care insurance for owners, spouses, and other selected employees and deduct the tax-qualified premiums as a business expense. Business owners can offer long-term coverage to most anyone that they choose to qualify.
Keep in mind: Businesses can deduct up to 100% of LTCi premiums. See the chart below:
& Ltd Liability Co.s
More than 2% Shareholders
Choice & Control
100% for employees and owners, including spouses & retirees
Employees – 100%
Partners - 2%
Limits include spouses and other dependents
Employers don’t pay payroll taxes for LTCi premiums paid for employees, their spouses, & eligible dependents.
Select groups of individuals for coverage. Can include spouses of employees and retirees
Fund business agreements utilizing long-term care choices.