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Considering long-term-care insurance

Long-term-care insurance is one option for financing long- However, long-term-care insurance doesn’t make sense for
term care. Plans will typically cover a set number of years, every client — or even most clients, according to Thomas N.
and they can be used at any age, Brian I. Gordon, president of Tillery, vice president at Financial Planning Advocate LLC and
Senior Living Advisors and Murray A. Gordon & Associates in vice president/chief compliance officer of Paraklete Financial
Bannockburn, Ill., said. For example, Gordon had a client who Inc. in Kennesaw, Ga.
began drawing insurance at 48 after having a stroke. Clients with assets under a certain amount can have their
As premiums for long-term-care insurance go up as age goes long-term care covered by Medicaid, he explained. “It might not
up, it can be better to buy it earlier in life, said Donna Wood, be in the facility you would have chosen, but from an actuary’s
CPA/PFS, the CEO of Wood Smith Advisors in Franklin, Tenn. Some perspective, long-term-care insurance wouldn’t be a good use
employers offer long-term-care insurance as a benefit, she noted. of your resources.” Similarly, his practice has found that it often
Colleen Weber, CPA, a fee-only wealth manager and owner benefits more affluent clients with over $2 million in assets to
of Colleen Weber CPA, LLC in Chanhassen, Minn., said there are self-insure, though they’ll need to be diligent about investing
two circumstances where clients are likely to consider long- funds that would have gone to long-term-care insurance
term-care insurance. First, if they think they’ll need assistance premiums, he said.
earlier in life due to hereditary conditions, they might purchase There are drawbacks to long-term-care insurance. Insurance
insurance to avoid bankrupting a partner who could outlive carriers can go out of business, income tax laws could shift so
them, she said. “The other is a client who can afford the that long-term-care premiums are no longer deductible, and
premiums and is looking to protect assets to ensure their legacy the government could institute new programs to make long-
goes to their kids,” she said. term care more affordable in the future, Tillery explained. Some
Overall, she has been surprised to see how many clients hold clients may not qualify for long-term-care insurance due to their
their policies even as premiums increase, she said. “They really age or health conditions, or those factors can make premiums
see the value,” she said. prohibitively expensive.

long-term care, “there’s better data than ever for allow them to age in place, she noted. Medicare also
financial planners,” she said. “We have actual claims contributes to shorter stays in skilled nursing facili-
data identifying cost of stay, length of stay, age and ties — up to 100% for 20 days or less — which may
condition when accessing long-term care, and data occur after a surgery or health scare, Tillery noted.
on how people are paying for long-term care.” Health savings accounts are a great option for
covering long-term care for clients with that asset,
Introduce options for financing Long said. They can even be used to pay for long-
When discussing long-term-care plans with clients, term-care insurance premiums up to a certain limit
the conversation should cover health concerns, the (see the sidebar, “Considering Long-Term-Care
importance of maintaining assets for an inheritance, Insurance”). Long-term-care riders are becoming
and the lifestyle the client expects to experience in more common on life insurance policies, too, she
long-term care. noted. “With this type of policy, at least some type
People may not realize how many options they of benefit is guaranteed, alleviating one of the key
have when it comes to financing long-term care, drawbacks to long-term-care insurance alone,” she
which is another reason it’s an important conversa- said. “The downside is that the cost of care may
tion to have with clients. exceed the benefit, which would require use of
Some clients may choose to invest in long-term- retirement funds or other assets.”
care insurance, for instance, which can be used For clients who expect to live beyond 85, a quali-
in combination with money from other sources. fied longevity annuity contract is also an option,
Others may prefer options such as continuing care Long said. “Learning about the options that are
retirement communities and assisted living. These out there from a trusted broker can be a real help to
options may come with a hefty down payment, clients, as the thought of planning for living longer
but they typically replace the cost of rent or home rather than planning for when you’re at the end of
ownership, Wood said. Clients can even consider a life is simply an easier pill to swallow, even when
reverse mortgage to cover home updates that could you’re solving for the same problem,” she said.

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