Everyone talks about retirement planning these days. Yet, one of the best ways to preserve your savings as you approach retirement is ignored by many financial advisors.
It is, in fact, 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.
What is it? The Long-Term Care Insurance Partnership Program. When you own one of these affordable insurance plans, you can shelter your assets even if you exhaust all the money from your policy.
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.
Small Policies = Big Benefits
You often read articles about Long-Term Care Insurance being costly. No question, they can be depending on your age and health when you obtain your coverage. However, it is more than just about that.
Long-Term Care Insurance is custom designed. You get to decide the amount of benefits you wish to have in place. Even a small policy can provide many hours of in-home care, giving your family a huge break.
For example, if you have $1500 a month in benefits in your policy, you would have about 65 hours a month of in-home care if based on a $23 an hour cost. It might not be a complete solution, but your family would not have to burden the entire responsibility of caregiving.
If you own a Partnership Long-Term Care Insurance policy, a small policy can also provide a substantial amount of asset protection since you get the dollar-for-dollar asset protection. You can shelter a portion of your assets, or if you have a modest amount of savings to start with, shelter most or all your assets with a small policy. Small policy equals a much smaller premium.
Remember, the younger you are, the more affordable the premium. Don't delay planning for the costs and burdens that come with long life.
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.
Get more details on the partnership program - What is a Long-Term Care Partnership Policy? | LTC News
Get Expert Help
Most financial advisors and general insurance agents lack training on the partnership program. Few advisors and agents work with all the top insurance companies, and premiums vary over 100%. Plus, Long-Term Care Insurance is medically underwritten, and every company has its own rules.
Be sure to seek the assistance of a licensed and experienced Long-Term Care Insurance specialist. A specialist will help provide you with accurate quotes and recommendations as they navigate all the available options - Work With a Specialist | LTC News. The best time to plan is before retirement.
About the Author
An LTC News author focusing on long-term care and aging.
Contributor since August 21st, 2017
Currently, 45 states offer these Partnership Long-Term Care Insurance policies, which provide you with additional dollar-for-dollar asset protection. Find your state - Compare State's Long-Term Care Details | LTC News
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 living 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 - Work With a Specialist | LTC News.
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. Long-Term Care Insurance 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. 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.
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 about 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 - Why Are There Articles About LTC Insurance Premiums Going Up? | LTC News
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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Reverse Mortgages Can Be Part of a Plan
If you find most of your assets are tied to your home, today's reverse mortgages might help as the solution for either funding Long-Term Care Insurance or paying for care. Learn more here.
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