Case Study #3:  The Affluent Couple


Advisors to the affluent tend to recommend "self-funding" potential Long-Term Care needs.   However, there are a variety of factors to consider before taking this course of planning.  


Even though the affluent are capable of taking on the financial burden of Long-Term Care expenses, few really understand the impact it may have on their long-term financial goals.


In this case study, we make the following planning assumptions:


  • The couple, both age 55, have asset of $5M including the business they own and intend on selling it prior to retirement.


  • They intend to generate a $120,000 annual income from their assets at retirement.   This will allow their assets to grow over time, and they plan to leave the remainder of their estate to thier heirs and charities they support.


  • Their income needs includes an annual 3.5% Cost of Living Adjustment (COLA).


  • Their assets will have a net rate of return of approximately 4%.


  • At age 85, one of them experiences a significant "Alzheimer's" type of Long-Term Care event lasting 10 years.



Below you will see the different scenarios which might play out for this couple, based on two different planning models.....

Scenario #2 (Red Line):

Since the affluent often seek "top-tier" LTC services, and the availablilty of these services are priced at a premium, they will need to tap a significant portion of their assets to cover the cost.   While even a lengthy "Alzheimer's" type of LTC event will not change their lifestyle, it may have significant impact on the couple's estate planning goals and charitable inclinations.    


Scenario #2 (Green Line):

In this situation, reallocating a portion of the couple's assets to plan for potential LTC needs allows them to meet all of their stated goals.  The reallocated assets will protect them from the financial effects of "asset depletion" due to a LTC need, while still allowing their estate to experience significant growth over time.





There's simply little reason NOT to have a Long-Term Care Plan!!   The affluent have the ability to handle the financial burden of a Long-Term Care event, but often misunderstand how proper planning can augment their estate planning and charitable goals.  In fact, if their Long-Term Care plan is never utilized, the reallocated assets will often be returned to the estate as a tax-free life insurance benefit so it's a "win-win" all the way around. 

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