Creating a comprehensive estate plan requires you to consider a number of factors that might impact you as you age, including the likelihood that you, or a spouse, will need long-term care. If you do end up needing long-term care (LTC), the cost of that care could put your estate assets at risk if you failed to plan for the possibility ahead of time. One way to plan ahead for LTC is to purchase LTC insurance. Long-term care insurance, however, is not right for everyone. To help you decide if it is right for your estate plan, a Baldwin Hills estate planning attorney explains the pros and cons of long-term care insurance.
Planning for Long-Term Care Should Be Part of Your Estate Plan
Long-term care planning should be part of every estate plan given the probability that you will need care and the high cost of that care. When you enter your retirement years (at age 65) you will already stand a 50 percent chance of eventually needing some type of long-term care. With every passing year, those odds increase. If you are married, your spouse shares the same odds of needing LTC. Nationwide the average cost of a year in LTC was around $90,000 for 2018. Californians, however, paid an average of $117,000 for a year of LTC that same year. What makes the cost of LTC so problematic though is that neither private insurance policies nor Medicare will cover expenses related to LTC. This is why incorporating long-term care planning into your overall estate plan is so important.
Long-Term Care Insurance
One way to plan ahead for the possibility that you, or a spouse, will need to pay for LTC is to purchase long-term care insurance. As the name implies, long-term care insurance is a separate insurance policy that specifically covers costs associated with LTC. Understanding the details of an LTC policy can be challenging, and no two policies are exactly the same. Before you consider purchasing an LTC policy it is imperative that you are clear on what the policy does cover, and what it doesn’t cover. For example, an LTC insurance policy may cover some, or all, of the following:
- Nursing home care
- Home health care
- Respite care
- Hospice care
- Personal care in your home
- Services in assisted living facilities
- Services in adult day care centers
- Services in other community facilities
Like any other type of insurance, a long-term care insurance policy may also exclude certain types of treatment or care. It is fairly common, for instance for an LTC policy to exclude mental or nervous disorders or diseases, other than Alzheimer’s disease or other dementia. They also frequently exclude alcohol or drug addiction as well as attempted suicide or self-inflicted injuries. While these exclusions may not pose a significant problem, some of the limitations of the policy may. When evaluating an LTC policy, pay particular attention to the following:
- The cost you will pay over the lifetime of the policy. Premiums increase the older you are when you take out a policy; however, even a lower annual premium will add up if you are paying that premium for 20, 30, or even 40 years before you actually use the coverage.
- Waiting period. Many MTC policies have a waiting period during which time the policy will not cover expenses, meaning you will be responsible for covering them.
- Maximum benefits. Be sure you understand if the policy has an annual or lifetime maximum because you will be responsible for any expenses that exceed those maximums.
- Coverage away from home. Will the policy cover you outside of the U.S.? If not, are you planning to remain in the U.S. when you retire?
- Automatic termination. Some LTC policies terminate at a specific age or after a specific number of years, once again leaving you responsible for additional expenses.
Is Medi-Cal Planning a Better Option?
Only you can decide if long-term care insurance is right for you; however, talk to your estate planning attorney about Medi-Cal planning before deciding to purchase an LTC insurance policy. The cost of an LTC insurance policy can be prohibitive for many people. While Medicare won’t cover LTC expenses, Medi-Cal (California’s Medicaid program) will. Medi-Cal eligibility can be problematic though if you failed to plan ahead. If there is a possibility you will need to rely on Medi-Cal in the future, including a Medicaid planning component in your estate plan now is imperative.
Contact the Collins Law Group
For more information, please join us for an upcoming FREE seminar. If you have additional questions about long-term care insurance, contact an experienced estate planning attorney. Contact the Collins Law Group by calling (310) 677-9787 to register for one of our FREE estate planning workshops.