Handling Long-Term Care Needs Before They Arise

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Handling Long-Term Care Needs Before They Arise
Some people are lucky to accumulate wealth because they are in the right place at the right time. Others are unfortunate and lose assets because they are in the wrong place at the wrong time. Doctors obviously don’t believe in relying on luck to build wealth. If they did, they wouldn’t spend so many years in training. Would it surprise you to learn that, after all that hard work to build careers in medicine, most Doctors ultimately leave their wealth accumulation and asset protection to chance?
We are not saying that Doctors don’t work hard after they get into practice. To the contrary, the opposite is true. Doctors work too hard when they need to be working smarter. This chapter explains how Doctors can efficiently protect themselves from long-term care risks, get a valuable tax deduction, and preserve their valuable retirement assets. This is a key to working less, as it allows a retiring Doctor to quit practice with a smaller, yet more effective, safety net!
Before we discuss long-term care insurance and how to most efficiently purchase the right policy for you, we need to first see how big a risk the expenses associated with long-term care really are.
Why Is Long-Term Care A Big Risk?
According to the AARP Research Report on Long-Term Care (Ari N. Houser, AARP Public Policy Institute, October 2007 (http://www.aarp.org/research/longtermcare/ternds/fs27ritc.html)), on average, two-thirds (69%) of people over age 65 today will need some long-term care. The average duration of need, over a lifetime, is about three years. Women live longer and have higher rates of disability than men, so older women are more likely to need care (79% v. 58%), and, on average, need care for longer (3.7 years v. 2.2 years).
In the U.S., the average stay in a nursing home is between two to three years. In some areas of the country, the cost of nursing home care or quality around-the-clock in-home care may be $200-$300 per day. This means that the average home healthcare stay costs between $150,000 and $320,000. Additionally, the U.S. Health Care Administration reports that costs are increasing 5.8% per year and are expected to more than triple in the next 20 years. At these projected rates, the costs may be between $500,000 and $1,000,000 by the time you or your spouse need long-term care. Are you sure that you, your parents, and your in-laws all have hundreds of thousands of dollars in “extra” funds within your retirement and estate plans to cover this highly plausible expense?
In some parts of California, the cost of living is well above the national average, and so the cost of long-term care is also substantially higher than the national average. Within the state, there can be vast differences between urban and rural areas, with the urban areas being more costly. According to a Genworth Cost of Care study released in April 2008, long-term care costs in California increased as much as 44% over the past five years. The increases are, in part, due to a shortage in the health care workforce to care for the growing number of elderly people.
Costs of in-home care are significantly higher and can amount to $150,000 to $320,000 per year. These costs will continue to increase at disproportionate rates because of the growing number of baby boomers in need of care over the next 30 years.
Long-Term Care Insurance (LTCI) covers health insurance costs for those people who cannot take care of themselves. These costs may include nursing home care, in-home care, and many other expenses. This chapter will explain why and how the most financially astute Doctors make long-term care planning a high priority in their planning. More specifically, this chapter will discuss the need for LTCI, why is often overlooked, why the government won’t help you, what types of coverage exist, and how they can help you.

A photo by Anna Dziubinska. unsplash.com/photos/mVhd5QVlDWwThe Need For Long-Term Care Insurance (LTCI)
There are two basic reasons why many Americans may need to obtain long-term care insurance. First, modern advancements in medicine, science, and technology have helped to increase the average life expectancy of people. Predictably, with this increased life expectancy, there is a greater chance that people may suffer a debilitating illness that will require them to seek significant long-term care. Even though medicine keeps people alive longer, there are still incurable diseases that don’t kill you, but will leave you requiring assistance. Neurological disorders like Alzheimer’s are perfect examples. An Alzheimer’s patient could need significant care for 15 or 20 years before dying. These advances in medicine can come with a hefty price tag for some people.
With the trends of increasing life expectancies, in conjunction with the increasing costs of medical expenses, long-term care will impact an increasing percentage of the population and can be very expensive. Doctors are aware of the increased life expectancies and rising medical costs, but need to be consciously aware that long-term care costs can easily wipe out retirement savings and eliminate any inheritance you would have otherwise left for children or grand-children (or would have received from your parents or in-laws). When armed with the right information, Doctors can make the decision to include LTCI in their comprehensive plans and work with their advisors to do so as cheaply and efficiently as possible.
In addition, having a plan for long-term care demonstrates a desire to have quality care in the event it is needed and represents a financial prioritization of that desire. Having a system in place will make it more likely that necessary care and assistance is provided earlier. Children of aging parents often delay getting help because they are concerned about how it will be afforded. According to the National Census Bureau (2006), the average national income is $48,201 and adult children may be ill-prepared to spend from their own income for supplemental care and reluctant to request spending from their parents’ funds to obtain the needed help.
An AARP Study, Valuing the More

Paying Bills Even If You Can’t Work

Posted by & filed under Business Owners, Healthcare, Resource.

Paying Bills Even If You Can't Work

Paying Bills Even If You Can’t Work
If you are like most of our other clients with high incomes, the single greatest asset your family has is your earning power. This reality motivates most people to buy life insurance as protection against a premature death. For most people, purchasing life insurance is “common sense.” While most people with whom we speak are underinsured, they do have at least some protection against a premature death. However, most Average American professionals, entrepreneurs, business owners, and executives often overlook a more dangerous threat to their long-term financial stability—their own disability. What is the risk that the average individual will suffer a disability? According to marketing materials of more than one life insurance company:
“Probability of at least one long-term disability (90 days or longer) occurring before age 65 is: 50% for someone age 25; 45% for someone age 35; 38% for someone age 45; and 26% for someone age 55.”
Inadequate disability income insurance coverage can be more costly than death, divorce, or a lawsuit. Responsible financial planning includes planning for the best possible future while protecting against the worst possible events. No one ever plans on becoming disabled—though half of those aged 25 will have a disability of three months or longer at least once. This chapter explains not only why you need disability insurance, but also what to look for in a disability policy.

The Need For Disability Insurance
In our opinion, the disability of the family breadwinner can be more financially devastating to a family than premature death. In both cases, the breadwinner will be unable to provide any income for the family; however, in the case of death, the deceased earner is no longer an expense to the family. Yet, if the breadwinner suddenly becomes disabled, he or she still needs to be fed, clothed, and cared for by medical professionals or family members. In many cases, the medical care alone can cost hundreds of dollars per day. Thus, with a disability, income is reduced or eliminated and expenses increase. This can be a devastating turn of events and can lead to creditor problems and even bankruptcy.
If you are older (near retirement) and have saved a large enough sum of money to immediately fund a comfortable retirement, then you probably don’t need disability income protection. Of course, you may have some long-term care concerns, but that is covered in the next chapter. On the other hand, if you are under 50 years old, or if you are older than 50 and have several pre-college age children, you should consider the right disability insurance a necessity. The challenge is determining what type of disability income policy is “right” for you.

Employer Provided Coverage Often Inadequate
If you are an employee of a university, HMO, or other large corporation, your employer may provide long-term disability coverage. The premiums are probably discounted from what you would pay for a private policy. We advise you take a good look at what the employer-offered policy covers, and buy a private policy if you and the insurance professional on your advisory team decide you need it. For many people, this makes a lot of sense because employer-provided group policies are often inadequate. They may limit either the term of the coverage or the amount of benefits paid. For instance, benefits may last only a few years or benefit payments may represent only a small part of your annual compensation. Since this is most commonly an employer-paid benefit, the money received during your disability will be income taxable to you. For most, this arrangement would result in your taking home less than half of the original amount in your paycheck after taxes are paid!

Give Yourself a Check-Up
Most people with employer-provided disability insurance coverage will find the benefits inadequate. To help you determine where your existing coverage may be lacking, we have provided some questions for you to ask when you are giving yourself an insurance check-up. When you are ultimately working with the insurance professional on your advisory team, you should keep some of these questions in mind as well. They will help you better compare coverage options from different companies so that you can find the best policy for your specific circumstances and goals. Below are a list of some questions you should ask yourself as well as short explanations of the appropriate answers:
· How long does the disability coverage last?
· How much is the benefit? (Some plans may cap the benefits at $5,000 per month)
· What percentage of your income is covered? (Generally, you cannot receive more than 60% of income and the benefit is capped at $7,500 or $10,000, depending on your age). Though most group LTD plans are good for the purpose that they serve, they are only a partial cure. Because of the limitations or ‘cap,’ they have a built—in discrimination against higher income employees—like you!
· Who pays the premiums? (TIP: If you pay the premiums yourself, and not as a deductible expense through your business or practice, your benefits will be tax-free.) You may be seduced by the income tax deduction of the premiums, but the extra tax burden today is much easier to swallow than the tax burden will be if you suffer a disability and have a significantly reduced income and increased expenses. When you and your family need the money the most, you will have more.
· Is the policy portable, or convertible, to an individual policy if you leave the group? If so, do you maintain your reduced group rate?
· If your business distributes all earnings from the corporation at year-end in the way of bonuses to all owners/partners (typical of C-corps as a way to avoid double taxation), you should see whether these amounts are covered by the group policy. If not, and if bonuses or commissions make up a substantial part of your income (which we have seen to be the case with many people), you’ll More