LTC client seminar: The impact oflong term care onwealth management

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The 3 phasesof wealth management

Asset accumulation:Asset accumulation:Real estateReal estate Mutual fundsMutual fundsStocksStocks Equity indexed annuitiesEquity indexed annuitiesBondsBonds CDsCDsFixed annuitiesFixed annuities Variable annuitiesVariable annuities

Asset distribution:Asset distribution:Retirement incomeRetirement incomeSocial Security retirement benefitsSocial Security retirement benefitsIRA distributionsIRA distributionsEstate planningEstate planningInheritanceInheritance

Asset protection:Asset protection:Life insuranceLife insurance Auto insuranceAuto insuranceDisability insuranceDisability insurance Homeowners insuranceHomeowners insuranceHealth insuranceHealth insurance Long term care insuranceLong term care insurance

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What is long term care insurance and what does it do?

Long term care insurance is not just Long term care insurance is not just nursing home insurance!nursing home insurance! Nursing facilityNursing facility Assisted living facilityAssisted living facility Home and community based careHome and community based care Adult day careAdult day care Hospice careHospice care

Long term care is also:Long term care is also: Illness and injuryIllness and injury DisabilityDisability Cognitive impairmentCognitive impairment

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Which of these is a concern to you?

Depending on others for careDepending on others for care Being a burden to children or spouseBeing a burden to children or spouse Preserving independence and avoiding Preserving independence and avoiding

welfarewelfare Leaving a legacy of debtLeaving a legacy of debt Maintaining access to quality careMaintaining access to quality care Spending life’s savings on care Spending life’s savings on care

expensesexpenses Protecting assets and having an estate Protecting assets and having an estate

for your heirsfor your heirs

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The facts

Over 50% of all Americans will need long Over 50% of all Americans will need long term care in their lifetime. term care in their lifetime. (Americans for LTC Security, (Americans for LTC Security,

August 1999)August 1999)

For a couple turning 65, there is a 75% For a couple turning 65, there is a 75% chance that one of them will need long term chance that one of them will need long term care.care. (The Wall Street Journal, June 2000)(The Wall Street Journal, June 2000)

Family caregivers provide 80% of long term Family caregivers provide 80% of long term care; institutions such as nursing homes care; institutions such as nursing homes provide only 20%. provide only 20%. (ALS Association, 1999)(ALS Association, 1999)

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What is the cost of care?

Costs vary by locationCosts vary by location Nursing homes: $44,895 per year, national Nursing homes: $44,895 per year, national

average average (LifePlans, Inc., 2000 National Claimant Study)(LifePlans, Inc., 2000 National Claimant Study)

Assisted living facilities: $12,000 to $36,000 Assisted living facilities: $12,000 to $36,000 per year per year (NCAL/AHCA, Survey of Assisted Living Facilities, 1996)(NCAL/AHCA, Survey of Assisted Living Facilities, 1996)

Home health care aide: $12.00 to $24.00 per Home health care aide: $12.00 to $24.00 per hour hour (Kiplinger’s Retirement Report, Hourly Cost of Home-Care Help, January 2001)(Kiplinger’s Retirement Report, Hourly Cost of Home-Care Help, January 2001)

Depending on where you live, long term care Depending on where you live, long term care can cost anywhere from $40,000 to $100,000 can cost anywhere from $40,000 to $100,000 annually and the cost is projected to triple annually and the cost is projected to triple over the next 20 years over the next 20 years (Financial Planning, September 2000)(Financial Planning, September 2000)

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Who will pay?

Medicare?Medicare? Medicaid?Medicaid? Assets?Assets? Your Family?Your Family? Transfer the risk?Transfer the risk?

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The facts about Medicare

Medicare’s skilled nursing facility (SNF) Medicare’s skilled nursing facility (SNF) benefit does not cover most nursing home benefit does not cover most nursing home care.care.

Medicare does not cover homemaker Medicare does not cover homemaker services.services.

Medicare does not pay for home health aides Medicare does not pay for home health aides to give personal care unless you are to give personal care unless you are homebound and are also getting skilled care homebound and are also getting skilled care such as nursing or therapy.such as nursing or therapy.

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Medicaid is a jointly-funded, Federal-State Medicaid is a jointly-funded, Federal-State health insurance program for certain low-health insurance program for certain low-income and needy people.income and needy people.

You may have to spend down or use up most You may have to spend down or use up most of your assets on your health care before of your assets on your health care before Medicaid is able to help.Medicaid is able to help.

State laws differ about how much money and State laws differ about how much money and assets you can keep and be eligible for assets you can keep and be eligible for Medicaid.Medicaid.

Nursing Facilities only reserve a limited Nursing Facilities only reserve a limited number of beds for Medicaid recipients.number of beds for Medicaid recipients.

The facts about Medicaid

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How does the potential cost of a long term How does the potential cost of a long term care event affect your wealth management care event affect your wealth management strategy?strategy?

Significant assets:Significant assets: Protect your assetsProtect your assets

Limited assets:Limited assets: Protect your lifestyleProtect your lifestyle

Assets

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Is your family physically able to help?Is your family physically able to help? Is your family financially able to help?Is your family financially able to help? Is your family emotionally able to help?Is your family emotionally able to help? Do you want to put the entire burden on Do you want to put the entire burden on

your children?your children?

Your family

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Three Major Financial RisksThree Major Financial Risks

OddsOdds Cost (deductible)Cost (deductible)

Auto accidentAuto accident1-2401-24011

$250 - $1,000$250 - $1,000

Home fireHome fire 1-12001-120022

$500 - $1,000$500 - $1,000

LTC eventLTC event 1-21-233

$112,238$112,23844

Transferring the risk

1. Life Association News, 1993. 2. Life Association News, 1993. 3. National Academy of Elder Law Attorneys, 1999. 4. Assumes

average nursing home cost of $44,895 per year and average stay of 2.5 years.