Long-Term Care Planning for couples has some unique variables to consider. The first factor to consider is that one of the individuals will likely become a caregiver and/or will survive the spouse who required care. The second factor is that the individual not needing care will neet to maintain their standard of living, while still addressing the financial burden of associated with Long-Term Care needs for the spouse.
In this case study, we make the following planning assumptions:
Below are four different planning scenarios which could play out for this couple.....
Scenario #1 (Purple Line):
In this situation, the couple plans on a lifetime income stream which will last well beyond age 100 and the opportunity to leave a legacy to their heirs. Long-Term Care is neither needed or planned for, so the the outcome is predictably successful.....assuming all goes well.
Scenario #2 (Red Line):
In this situation, a five year Long-Term Care need may have a significant impact on the couple's planning goals. The healthy spouse wants to maintain those planing goals, even while addressing Long-Term Care needs for their ailing spouse. Unfortunately, a Long-Term Care need of this duration may require a change in their retirement income plan or a re-evaluation of their desire to leave a legacy to their heirs. After working hard throughout their life, neither is likely to be an acceptable option.
Scenario #3 (Blue Line):
In this situation, reallocating a portion of the couple's assets to plan for potential Long-Term Care has little impact on their long-term plans. Their lifetime income stream will last well beyond age 100, and allow them to complete their legacy planning, even if one spouse experiences a substantial need for Long-Term Care. If neither spouse has a need for Long-Term Care, there would be legacy to their heirs of over $1.2M, as the assets originally allocated for their Long-Term Care planning would return to the estate in the form of a tax-free life insurance death benefit.
Scenario #4 (Green Line):
In this situation, reallocating a portion of the couple's assets to plan for potential Long-Term Care needs allows them to meet all of their stated goals. Their lifetime income stream lasts well beyond age 100, and even they experience a substantial need for Long-Term Care they maintain assets for their legacy planning. In fact, if the surviving spouse passed at age 100, there would be legacy to their heirs of over $700,000.
By planning ahead, couples at or near retirement can acheive multiple planning goals, even with the reallocation of assets for their Long-Term Care plan. In the event Long-Term Care is never required, this couple will see little effect on their long-term income projections or desired legacy planning.