Aging Options

Protecting your children's inheritance might start with a Long-Term Care policy

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For years now, I’ve read with some disbelief articles about how the Boomers could expect a giant $27 trillion windfall from their parents.  Sure enough, it’s not likely to happen.  Part of that is that the postwar generation is pulling an Energizer Bunny and keeps going and going and going.  The other part of that is those same aging family members are requiring long-term care and so they’re spending their savings on their own care.  More startling perhaps, because of that long-term care the Boomers may be ponying up some cash to pay for their parent’s care when they run out of assets so instead of getting an inheritance, they’re likely to get a bill.  So, if you’re a Boomer, what have you done to prevent the same thing from happening to your children?

If you’ve reached the magical age of being between 45 and 65, and you haven’t purchased long-term care insurance yet, here’s a startling statistic.  The cost for purchasing a new long-term care policy in 2015 went up almost 9 percent over last year’s price.  According to an Elder Law Answers article, insurance for a healthy 55-year-old man looking to buy $164,000 in benefits rose 15 percent in the last year (from $925 in 2014 to $1,060 in 2015).  Insurance companies began charging women higher prices in 2013 so a woman in the same age bracket would have seen her costs rise from $1,225 a year ago to $1,390 in 2015.  These are the prices for new policies.  Some insurance companies raised premiums for current clients at even greater rates.  In some cases, such as policies covering couples, the cost of the insurance went up more modestly.

The volatility of long-term care prices means that fewer consumers choose to purchase policies and those that do purchase often buy less protection.  However, having a long-term care policy in place can offset some of the expenses of care and help to preserve an individual’s nest egg.  Even at thousands of dollars per year, a policy premium still falls well shy of the cost of a single month stay at a nursing home.   For those people looking to leave an inheritance for their children or grandchildren or those trying to protect their own or their children’s financial wellbeing, a long-term care policy can play a role in protecting those assets against an uncovered medical condition. Here are the eight things that affect the cost of your long-term care policy:

  1. How much your monthly benefit will cover
  2. How long the benefit lasts
  3. How high the deductible will be
  4. Whether you have an inflation policy
  5. Your age when you purchase the insurance
  6. The level of coverage
  7. Your health
  8. How long the elimination period is

One way to lower the cost of premiums is to extend the period in which you pay out of pocket for care.  Plans with elimination periods of several years tend to have much lower benefits and the benefits can be expanded to cover very long-term care nursing home stays.  Some states don’t allow elimination periods of longer than one year, however.

If you don’t have much money to protect, a long-term care policy is unlikely to be useful since any care you receive will likely deplete your reserves and allow you to qualify for Medicaid.  On the other hand, wealthier individuals may be able to self-pay long-term care and have options using those methods to preserve some wealth.  That leaves the middle class looking at this policy to help avoid bankrupting their future or relying heavily upon family members for care.

If you’re unsure that purchasing a long-term care policy is the best option for you, consider having a conversation with an elder law attorney or a financial advisor.  They can help you decide whether a policy is in your best interests and help you to determine what policy features and coverage make sense for you if they recommend purchasing a policy.

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