The elephant in the room that no one talks about.
This somewhat tired metaphor references an unseen but very much felt significant issue that everyone knows exists but no one wants to talk about. In estate planning it is without a doubt the issue of “ significant long-term care costs.”
Those of us who do estate planning are used to discussing what assets are owned by the clients we are talking to, sources and amounts of income, which assets are in IRA’s or other qualified retirement plans, who are the members of the family and what should we know about them, and finally goals and concerns about distributing assets prudently. Today, virtually no-one leaves without asking a question like this: What happens if one of us goes to a nursing home? What they are really asking is-“What will happen to our assets and our plan if we have to spend a lot of money on long-term care?”
The real question should be: “What can we do to protect and maximize our resources in light of the possibility of significant long-term care costs?”
We always ask whether or not clients have long-term care insurance and most do not. There are really two types of insurance that can be purchased today for the purpose of covering long-term care costs. Most typically today we see clients who obtain a long-term care insurance policy that pays a daily benefit for a term of years. Another type of policy that is available today is referred to as a hybrid policy that is life insurance with the ability to access value if you need long-term care.
Because we can do some significant estate planning to protect and maximize resources and do this in combination with long-term care insurance, we often suggest to clients that they see what their premiums would be for a policy that would pay a five-year benefit and only a portion of the necessary cost, such as $100 per day (it is not uncommon for the cost of a nursing home to be in excess of $200 per day in Kansas), after looking at cash flow issues and getting a feel for how much they could afford to pay as a result of income and other assets to get through a five-year period. This is because to become eligible for Medicaid (with its 5-year look-back) in many situations it is possible to transfer assets to an irrevocable trust and plan to cover costs for a five-year period with assets and long-term care insurance that are not put into this trust. In essence we can limit the risk for significant long-term care expense to be the cost of care for a five-year period and protect most if not all assets over and above what that cost of care for that five-year period would be.
We want to talk to clients about the elephant in the room-how do you plan for the possibility of significant long-term care costs? Contact our Wichita office at 316-729-0100 to schedule an appointment.