Lisa McAree, CLU, LTCP. Shaw Society Boston College May 2013

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1 Lisa McAree, CLU, LTCP Shaw Sciety Bstn Cllege May 2013

2 By 2030 nearly 71 millin Americans will be age 65 r lder - representing 20% f the American ppulatin 1 Where are we ging t live? What type f health insurance will we have? What are the risks and csts f a lng term care need? 1 Prudential LTC Cst Study

live? What type f health insurance will we have?

3 Lng Term Care is the type f assistance prvided t individuals unable t take care f their Activities f Daily Living Peple age 65 face at least a 70%¹ lifetime risk f requiring sme type f lng term care. (40% - fr nursing hme) Changes in mrtality rates as well as family dynamics has resulted in lng-term care becming a majr issue fr Americans tday. 1 Natinal Clearinghuse fr LTC Infrmatin, US Department f Health & Human Services, Administratin n Aging, 3

(40% - fr nursing hme) Changes in mrtality rates as well as family dynamics has resulted in lng-term care becming a

4 Discuss and dcument yur preferences fr lng term care. Prvide fr the best pssible care withut wrrying abut mney. Preserve the emtinal, physical and financial health f the healthy spuse/partner/child. Prevent family disputes and dissensin. 4

Preserve the emtinal, physical and financial health f the

5 When yu are in gd health Age 50 and abve When yur children have left hme If yu are self emplyed r wn a business During estate/retirement planning

6 Planning Discussin Questins What is yur family medical and lngevity histry? If LTC is needed - where d yu want t receive care? Hme: A place that is familiar and cmmunity is knwn hwever, islatin can be a prblem Lcatin Flrida/Arizna r where yur family is Are there children/relatives t manage the care? Are they capable? D yu want t set ut guidelines? Which assets are currently expected t pay fr care? 6

Hme: A place that is familiar and cmmunity is knwn hwever, islatin can be a prblem Lcatin

7 Financial Issues Designated Assets r Repsitined Assets Lng Term Care Insurance Reverse Mrtgage Update r secure apprpriate advisr relatinships Medical persnnel Private Banker/Trust Officer/Financial Advisr Attrney Care Manager: 7

apprpriate advisr relatinships Medical persnnel Private

8 Residential Issues Cnd vs. stand-alne hme ne flr vs tw flrs Hme Mdificatins i.e. first flr bedrm and bath Village Mdel: i.e. Beacn Hill Village Cmmunity Cntinuing Care Retirement Cmmunities Lcatin is it near family, gd medical care? 8

e. Beacn Hill Village Cmmunity Cntinuing Care Retirement

9 Claims - Mst prevalent Strke Dementia Arthritis Cancer Injury Surce: AALTCI, 2010 LTCi Surcebk

10 The Average Cst f Lng Term Care tday and in the future $160,000 Private Nursing Hme Care $310,000 $39,000 $132, The average annual cst is $39,000 (1) and is prjected t jump t $160,000 by (2) The natinal average annual cst is $132,000 (1) and is prjected t jump t $310,000 by (2) (1) Genwrth 2012 Lng-Term Care Cst Study. (Hme care csts based n hme health aide per hur: $25 x 5 hrs/day x 6 days/wk) (2) Prjected lng term care csts are based n 3% cmpund inflatin grwth.

(2) The natinal average annual cst is $132,000 (1) and is prjected t jump t $310,000 by 2032.

11 Medicare & Grup Health Insurance Pays up t 100 days in a nursing hme and sme limited hme health care if skilled care is required and yu are hmebund Medicaid pays fr lng term care fr the impverished Peple with assets pay ut f pcket Private Lng Term Care Insurance 11

and yu are hmebund Medicaid pays fr lng term care fr the

12 Lng Term Care Insurance (LTCI) Lng Term Care Insurance pays fr chrnic care needs Hme health care Assisted Living Facilities Nursing Hme Facilities Hspice, Adult Day care, Hme Mdificatins Care Management 12

Assisted Living Facilities Nursing Hme Facilities

13 Benefit Eligibility 1. A lss f the ability t perfrm, withut Substantial Assistance, at least tw Activities f Daily Living due t a lss f functinal capacity. This inability must be expected t cntinue fr at least 90 cnsecutive days. ADL s are Bathing, Cntinence, Dressing, Eating, Tileting and Transferring. OR 2. A severe Cgnitive Impairment that requires Substantial Supervisin t prtect yu frm threats t health and safety. A Plan f Care must then be develped by a Licensed Health Care Practitiner. 13

capacity. This inability must be expected t cntinue fr at least 90 cnsecutive days.

14 Designing the Lng Term Care Cverage Benefit Amunt: $1,500 - $15,000 per mnth Benefit Pls: # f Years selected t calculate yur pl f benefits. (2 Yrs 10 Yrs) Inflatin Riders: Inflatin Optins 3%, 5%, CPI Indexed Riders: Shared Benefits Premium Payments: Yur age is guaranteed but premiums can be increased. 14

15 The Cst f Lng Term Care Insurance What will lng term care insurance cst yu? Sample plicies have been prpsed n the next page in a cmparative frm. Assumptins have been made as t daily benefit, benefit perid, health status, etc. Final premium csts are prvided at the time f plicy issuance after underwriting apprval. 15

Assumptins have been made as t daily benefit, benefit perid, health status,

16 The Cst f Lng Term Care Insurance $7,500 per mnth, $360,000 initial benefit pl 4 year minimum benefit pl, 3% Cmpund Inflatin Rider Age Single Marital & Spusal 50 $2,784 $2, $3,087 $2, $4,135 $3, $5,589 $4, $8,791 $7,033 Genwrth Insurance Cmpany. State f Massachusetts. Standard Health Class May

$2,784 $2,227 55 $3,087 $2,470 60 $4,135 $3,309 65 $5,589 $4,471 70 $8,791 $7,033

17 Planning fr Lng Term Care Federal Tax Incentives Under HIPAA Cngress established qualified LTCI wuld have a number f favrable tax attributes. They are treated similarly t health insurance. Emplyer paid premiums are tax deductible Emplyer paid premiums are incme tax free t the emplyees f a crpratin Claim dllars paid t yu are received predminantly tax free. 17

They are treated similarly t health insurance.

18 Planning fr Lng Term Care Federal Tax Cnsequences Sle Prprietr, Greater than 2% sharehlder in S Crpratin r Partnership Eligible fr self-emplyed health insurance deductin, Limited t lesser f the IRS designated eligible LTC premium r the actual premium paid. Eligible Age Indexed LTC Premium in 2013 Age 40 r less $ 360 Age $ 680 Age $1,360 Age $3,640 Age 71 and lder $4,550 18

IRS designated eligible LTC premium r the actual premium paid.

19 Life/LTC Insurance The insured can utilize the death benefit (and pssibly mre) in their plicy fr lng-term care expenses. Linked Benefit Prducts Annuity/LTC The annuitant can utilize the accumulated value as either an annuity stream r fr lngterm care expenses. 19

Linked Benefit Prducts Annuity/LTC The annuitant can utilize the

20 Female Age 60, Nn Smker, 6 Year Benefit Perid $100,000 Single Premium Life/LTC Plicy LTC is nt needed: Guaranteed Death Benefit $170,000 LTC is needed: Guaranteed Max LTC Benefit $504,000 $7,000 Mnthly $84,000 Annually Guaranteed Death Benefit $170,000(minus) LTC Benefits Utilized Client changes her mind: Surrender Value Year 5 $100, $125, $130,000 Figures current as f Nvember

Mnthly $84,000 Annually Guaranteed Death Benefit $170,000(minus) LTC Benefits Utilized Client

21 1. N ne thinks that they will need lng term care. 2. Stay married r find a partner willing t help 3. Mve t an elder friendly envirnment when yunger If cnsidering LTC insurance 4. Use crprate dllars if available 5. Plan t self insure part f the risk 6. Buy inflatin prtectin 7. Buy mre dllar benefits less years 8. Buy when yunger and healthy 9. Share benefit pls if partnered 21

22 Number 10 Exercise yur bdy Exercise yur brain It s yur best bet t delay the need fr lng term care.! 22

Lisa McAree, CLU, LTCP The Bishp Cmpany, LLC 978-927-2008

23 Lisa McAree, CLU, LTCP The Bishp Cmpany, LLC bishpcmpanyllc.cm 23

PLANNING FOR QUALITY CARE AND INDEPENDENCE. Why you need to plan for long-term care assistance, and what funding options are available.

PLANNING FOR QUALITY CARE AND INDEPENDENCE Why yu need t plan fr lng-term care assistance, and what funding ptins are available. PLANNING FOR QUALITY CARE AND INDEPENDENCE The value f planning ahead The