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Long-Term Care Insurance

David Silver teaches The Legal Environment of Business in ECU's Department of Finance. Dave is also a Partner with The Graham.Nuckolls.Conner Law Firm in Greenville, NC, concentrating in Elder Law

If your health declines as you get older and you need to pay someone to help take care of you in your home ("personal care"), how much care could you afford and how long could you afford to pay for that? If you need to live in a more protected environment and get assistance with some of your activities of daily living ("assisted living"), what type of place could you afford? If you have a stroke or get hit by a bus and require skilled nursing care ("skilled nursing"), how long will your money last? The very wealthy can pay their own way in any of these situations without too much worry. The very poor can benefit from certain safety nets that will likely keep them from being thrown out on the streets in their old age. However, if you are somewhere in the middle and would like to leave some of your hard-earned wealth to your spouse or kids at your death if possible, then you should have a plan to deal with these situations.

Personal care, assisted living and skilled nursing are collectively known as Long Term Care, and Medicare does not pay for Long Term Care. I submitted articles in this forum last year describing government programs that provide assistance for Long Term Care: Aid and Attendance, Special Assistance and Medicaid. These programs often require a spend-down or limited assets for eligibility, potentially resulting in less funds that you can pass to your spouse or family at your death and often causing conflict for families with second marriages. Additionally, the facility that you would prefer might not participate in one of these programs or the type of room or care that you would want may not be covered. One way to take control of your situation is through the purchase of Long Term Care Insurance.

Long Term Care Insurance ("LTCI") is an insurance policy that you purchase from a private insurance company that will reimburse you for the cost of personal care, assisted living and/or skilled nursing. These types of policies can be expensive, especially if you are older or have health issues when you apply. The cost also varies depending upon such factors as the maximum amount of coverage per day, whether you have an inflation rider, and if you are willing to accept a lifetime cap on the policy. Declining an inflation rider or accepting a lifetime cap can be risky, but it is reasonable to lower the amount of your daily coverage if you expect to have a higher monthly retirement income.

Some LTCI policies are like fire insurance in that you don't get your premiums back even though you never use it. However, some LTCI policies act like whole life insurance: if you die without using it, your heirs get the premiums. If you have liquid assets of more than $300,000, or if you are in a second marriage, then I think you should at least consider LTCI. Your first step should be to ask your investment advisor. If you don't have an investment advisor that is familiar with LTCI, find an insurance agent who specializes in this type of coverage.

Long Term Care Insurance can provide peace of mind that you will be taken care of in your old age while ensuring that you still are able to leave your hard-earned wealth to your loved ones. If you are in a second marriage, it will relieve your spouse from having to utilize his or her separate funds to pay for your care (remember, Medicaid ignores prenuptial agreements). If you can afford it, you should at least consider it as part of your estate plan.

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