It is one of the biggest retirement secrets in the country—a program that allows you to shelter your estate from the high cost of future long-term care services. Yet, most financial advisors and general insurance agents know little or nothing about this vital program.
As people start planning for their future retirement addressing the high costs of long-term health care becomes an integral part of the planning equation. People understand how their health, body, and mind will change in the decades ahead. Often these changes will require you to need help either at home or in a facility. The costs of long-term care are not paid for by health insurance or Medicare. Families are not in a position to take on the role of caregiver. The consequences are enormous.
Therefore, the Long-Term Care Insurance Partnership program was created. It is a way consumers can protect assets with certain qualified Long-Term Care Insurance plans.
The Long-Term Care Partnership Program is a public-private partnership between states and private insurance companies, designed to reduce Medicaid expenditures by delaying or eliminating the need for some people to rely on Medicaid to pay for long-term care services.
In the late 1980s, four states adopted a partnership program on a test basis with funding received from the Robert Wood Johnson Foundation. California, Connecticut, Indiana, and New York were the original four states selected to participate.
Deficit Reduction Act
In 2005 President Bush signed the Deficit Reduction Act (DRA). The DRA authorized the remaining states to allow insurance companies to offer Partnership policies. These policies extend the benefits purchased by offering additional dollar-for-dollar asset protection or what is referred to as asset disregard.
A policyholder receives a dollar for asset disregard for every dollar an insurance company pays for your future long-term care. An owner of a Long-Term Care Partnership policy allows the policyholder who exhausts their LTC policy benefits to access Medicaid without the required "spend-down" of assets that is typically required.
For example, Fred in Pennsylvania purchases a partnership Long-Term Care Insurance policy at age 52. It features an initial $150,000 pool of money, with an initial $4000 a month, both growing 3% compounded every year (the benefits – not the premium).
When Fred is 82, he requires long-term care services. His benefit is now worth $364,089.40, with a monthly benefit of $9709.05. While in most cases, that would be plenty of benefits, Fred has Alzheimer's and exhausts all his benefits. Benefits still increase even as benefits are being used. So, in this example, let's say by the time he exhausts his policy benefits, the insurance company paid out $400,000.
The problem is Fred is still alive and still requires care. Pennsylvania requires a person to have no more than $2400 to qualify for Medicaid. However, since Fred had a partnership policy, they will disregard the $400,000 the insurance company paid in the calculation. If he has less than that amount, he would qualify for Medicaid and still be able to keep the $400k. Otherwise, the spend-down will disregard the $400k and will be less painful.
"The partnership is the best-kept secret in long-term care insurance. If I were selling it, it would be the only thing that I would advocate."Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI) a national consumer education and advocacy group.
Since many people move after they retire, most states will reciprocate. Reciprocity means not only are your benefits portable wherever you may move to the additional dollar-for-dollar asset protection of the partnership program will also be honored in most states.
Biggest Secret in Retirement Planning
Financial advisors often ignore the risk of long-term care expenses and its impact on lifestyle and legacy. Yet, the risk of needing extended health care is the single biggest devastating risk to your future retirement assets.
Even a small Partnership Long-Term Care Insurance policy will not only provide money for quality caregivers but will give you some asset protection. This way, you know you won't lose everything, even if you exhaust all your policy benefits.
The need for long-term care increases with age. Without planning, it will place the burden on your family and adversely drain assets. The family will face a crisis. You can avoid this crisis and make sure you have access to your choice of quality care by planning before you retire.
Take Action Before Retirement
Policies are affordable, especially if you obtain one before you retire. Most experts suggest starting your research in your 40s or 50s when you can enjoy low premiums and perhaps qualify for good health discounts.
The cost of Long-Term Care Insurance will be higher if you wait until you are older to obtain coverage. However, perhaps the biggest concern is your health. You may have health issues that limit your ability to get coverage or make it much more expensive.
More information on the partnership program can be found by clicking here.
Currently, 45 states offer these Partnership Long-Term Care Insurance policies, which provide you with additional dollar-for-dollar asset protection. Find your state by clicking here.
Your Health is Key When Applying for Coverage
The underwriting criteria differ with every company. You will have to answer several detailed health questions even to obtain an accurate quote. You ideally want to get coverage when you enjoy good health. If you are already receiving care in your home or if you live in a care facility, you would be ineligible for coverage.
Some policies offer coverage for those with some health issues. A Long-Term Care specialist can help you determine your eligibility based on your health history. You can find a trusted Long-Term Care Insurance specialist by clicking here.
Guaranteed Tax-Free Benefits
Remember, Long-Term Care Insurance is comprehensive. Most policies will pay for all levels and types of long-term care, including care in your own home. Plus, unlike your savings that are influenced by the markets, Long-Term Care Insurance provides you with guaranteed benefits, and policies cannot be canceled unless you stop paying your premium.
Many policies provide professional assistance at the time of claim. These nurses or licensed social works help develop a plan-of-care based on your wishes and the quality of care providers. The case management gives your family time to be family.
Resources to Help Research Policy Options
Use the tools available on LTC NEWS to help you in your research. Just click here. The resources include the LTC NEWS Cost of Care Calculator that shows you both the current and future cost of care services where you live.
You might read a lot of rate increases, but today's Long-Term Care Insurance is designed with updated and stringent rules. The bottom-line is Long-Term Care Insurance is rate stable. Most states now have rate stabilization rules that make it very difficult to raise premiums in the future.
Some companies offer single pay or limited payment options, eliminating the need to keep paying your premiums for the rest of your life.
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