The Mandatory Nature of Long-Term Care Planning

It’s a FACT.....From the day one receives a paycheck with a FICA deduction until they pass away after having their final Medicare Part B premiums deducted from social security benefits, healthcare is a mandatory expense.   For some, that could also mean a more significant Medicare premium for higher income earners or the staggeringly high out-of-pocket retiree healthcare expenses project by Fidelity Investments.  Even worse, all the healthcare-related costs mentioned so far exclude Long-Term Care (LTC), making that a specific planning item that cannot be ignored.  

In a “post-pandemic” world, the advisory community should give LTC more serious planning considerations, especially when a large percentage of your clients will need some form of LTC, and too few have planned for it.   Addressing this topic is more than another great way to impact your clients positively, and it simply cannot be ignored.   Even those “reluctant” to address the topic should implement some kind of formal Long-Term Care (LTC) Planning that integrates with a reliance on the following:

• Rely on Family or Friends:  If there are insufficient assets to cover the potential liability, there must be a determination whether siblings or adult children should become part of the discussion.  Are they willing or able to accept the physical, financial, or emotional responsibility role as a caregiver in the future?   It can become quite clear how there are seen and unseen events that make this a potentially disastrous planning scenario.

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• Rely on Government:   If insufficient assets cover the potential liability, plans should be set in motion to qualify for Medicaid, including a "spend-down" of assets - based on the state of domicile - to become eligible.  Consulting an estate planning or elder law attorney should be part of your recommendation.

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• Go It Alone:  Your client might believe "self-funding" is the best choice to cover potential LTC expenses excluded by Medicare, their  Medigap plan, or health insurance, but they should first understand why self-funding this risk is a poor choice.  Then, if self-funding remains your client's intention, that choice can't be considered viable planning until you've made sure the Essentials of Self-Funding LTC are addressed.

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• Risk Mitigation:  Insuring Long-Term Care may be the most efficient and effective route and can be accomplished in many different ways.  Using various insurance solutions to mitigate the risk and transferring some potential liability to an insurance carrier can be advantageous and easier than you might think. 

While experience tells you many clients won’t implement an insurance-based LTC Plan, that doesn’t eliminate the reality, risks, or the need for a formal planning component.  The planning tool to the right can be customized for your firm or practice to help you introduce LTC as a required planning topic as follows...   

• First, explain how and why LTC must be addressed as a financial planning topic, and click on the hotlink to incorporate the Nationwide Cost of Care Data. 

• Second, help them understand that not having a formal plan actually is a plan, much like not having a will or trust is a plan that results in probate.  Lack of planning defaults to self-funding, thus the “mandatory” nature of Long-Term Care Planning.

• Finally, as their advisor, a funding source must be identified and memorialized.....or an alternative, formal LTC Plan should be discussed.  

We are confident you can use this tool effectively, and we look

forward to hearing from you when you have cases to discuss.