Long-term Care: To Buy or Not to Buy?
SUWANEE, Ga., Feb. 22 /PRNewswire-USNewswire/ -- As long-term care becomes an increasingly "hot topic" as baby boomers enter retirement, many retirees are left with the confusing question: "Should I buy long-term care insurance? Is it worth it?"
A long-term care policy is one way of protecting your assets if you or your spouse falls ill. Similar to a personalized financial plan, long-term care policies are as unique as the buyers themselves. Speaking with your financial advisor can provide you with necessary information tailored to your specific situation and needs.
Mark Lloyd, the president and founder of Suwanee, Georgia-based asset protection and estate planning firm, The Lloyd Group, Inc. has outlined the important points to help boomers decide if long-term care insurance is right for them:
1. Odds of using long-term care
The odds of needing long-term care in your lifetime are now up to 70 percent. That is far greater a risk than an auto accident or a house fire.
2. Spend Down
Today, many retirees risk spending down their entire life savings in long-term care needs before they die, leaving nothing to their heirs or their surviving spouse. The most common governmental benefit is provided by Medicaid; a married couple can have approximately $100,000 in savings and still qualify for nursing home benefits through Medicaid. A single patient has to spend their savings to $2,000 before they are eligible for those same benefits.
Most retirees want to be independent as long as they can, even with the simple things such as driving themselves to the store or doctor appointments.
Americans are living longer. There are more people over the age of 100 today than at any other time in our history.
5. Recovery Purposes
Although long-term care is associated with seniors, there are some interesting statistics regarding a younger population. One of the largest group carriers in the U.S. found that in 2006, almost 58 percent of the long-term care claims handled were for people under the age of 65. The average claim for this age group lasted a year or longer. The analysis showed that 30 percent were cancer claims and more than 10 percent were strokes. The additional leading causes of claims were neurological disease, dementia and multiple sclerosis.
6. Underwriting Changes
Insurance companies during the past 40 years have found out that more policy holders who have purchased these policies have kept them longer than anticipated. In the past, many companies priced their plans anticipating a certain amount of policies lapsing. This meant extra profit for the company. When the numbers of lapsed policies were less than expected, claims increased, forcing them to re-evaluate underwriting guidelines.
7. Government Encouragement
Recently, federal and state governments have been on a push for people to purchase their own long-term care policies. One reason is: the more people that purchase long-term care insurance -- the less that will tap into the Medicaid and Welfare programs. The strategy behind this is three-fold. First, it is tougher to qualify for Medicaid. Strategies that were once used by elder law attorneys and certified estate planners are now against the law. Secondly, some states have developed co-op programs to encourage residents to purchase long-term care policies. In most cases, whatever the value that the policy will pay, it will be matched by the state in free long-term care benefits in the future. In this situation, it is important to note that most states have a cap on benefits. Thirdly, tax qualified long-term care policies may be tax deductible.
8. Law Changes
The federal government and some states have changed the rules on what Medicaid applicants can do to qualify for benefits. One of the major changes that took place on February 2, 2006 was the enactment of the Deficit Reduction Act (DRA). This law changed the rules on "look-back periods" for gifting from 3 years to 5 years. Also, if a gift were made -- whether being money or property -- the penalty calculation would be figured from the date of application to Medicaid, instead of the old law, which started from the date of the gift. One other difference pertains to the usage of Life Estate Survivorship deeds. The new law may treat them as if the gift never took place for Medicaid eligibility.
9. Estate Recovery
If a person needs Medicaid for their long-term care 49 out of 50 states have already adopted laws that attach a lien against the equity in one's home, making it so that when the Medicaid patient and their spouse, passes away, the state will require payment back for the monies that they contributed toward their healthcare.
10. Health-care flexibility
One of the most popular health care choices is using at-home health care. With good home health care benefits available in most long-term care policies, this choice is often a reality. Many policyholders use the home health care benefit to provide a sitter or a home health aide to help with daily activities. Some of the more common illnesses that utilize home health care include: Alzheimer's disease, cancer, stroke and illnesses that affect stability and mobility.
This article was written by Mark Lloyd, his credentials include Certified Estate Planner, Registered Financial Consultant, and a member of the prestigious Million Dollar Roundtable. Mark is available to comment as an expert resource on all matters involving retirement planning, including asset protection, 401 (k), IRA and pension plan rollover options, estate tax, long-term care strategies, as well as other senior-focused financial concerns.
Founded in 1994 by Mark Lloyd, The Lloyd Group Inc. solely serves the distinctive financial needs of those nearing retirement and those already retired. The Lloyd Group Inc. is a member of the Metropolitan Atlanta Better Business Bureau and The National Institute of Certified Estate Planners. Lloyd is also the host of "Focus on Retirement," the greater Atlanta area's leading radio show devoted to retirees.
SOURCE The Lloyd Group Inc.
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