Sgroi Financial Hosts Long Term Care

Roundtable to Address Upcoming Crisis

Urmas Lupkin
Vice President Sales & Marketing

There are storm clouds on the horizon. The baby boom generation is aging and people are living longer. We have all seen the statistics in regards to the ever increasing utilization and cost of long term care. Perhaps the most eye opening is that 70% of people aged 65 or older will need some level of long term care services at some point. The problem is compounded by the fact that traditional long term care insurance is becoming increasingly difficult to get and, when you can get it, it is more expensive for coverage that isn’t as robust as it was a few years back. Given this back drop, we at Sgroi Financial hosted a long term care roundtable for our planners to dig deeper into the issue and to search for other alternatives to help protect our clients. We invited 3 experts from various fields to present on the topic, Andrew Hilton of Andrew Hilton Attorneys, Jonathan Alexander of Lincoln Financial and Steve Chambers from Nationwide Insurance.

The first alternative is to do nothing and wait and see. This has been the most popular plan. According to Pat Sgroi, President of Sgroi Financial, “The vast majority of people feel that they don’t have a plan for long term care. While this may be true, the government does have a plan for them and it’s not ideal.” That plan requires spending down their assets before Medicaid kicks in. This isn’t ideal if it is important for you to leave a legacy to your children. If you’re not concerned about that, the other thing to consider is that of the lifestyle of the spouse who remains in good health. People save their whole lives to have a comfortable retirement. That plan will take a serious hit if one spouse suddenly needs long term care. Instead of the income going to support a nice lifestyle, it will now be diverted to paying for care. According to Andrew Hilton, “It’s never too late to try to protect assets but it is much easier and more effective to plan in advance instead of waiting until something happens.” Many of the legal strategies include gifting assets to get them out of your name, but it must be noted that gifts are subject to a 5 year lookback provision. If you are not comfortable giving away your life’s savings, which you may need to live on, then this might not be right for you.  As always when considering legal remedies you should consult an attorney that specializes in estate planning to further explore the various legal options.

If you considered the above options and have decided they are not a good fit for your financial plan, what are your options to traditional long term care insurance? One of the biggest drawbacks to traditional long term care insurance is that you could pay the premium for years and, if you never use it, you may feel that the money spent on premiums was wasted. The insurance industry is evolving and there are other hybrid products that have become available. Lincoln financial has a product called Lincoln Money Guard. This product is a way to use life insurance to reposition a portion of your assets and utilize leverage to get a larger long term care benefit. One of the top benefits to this type of approach is it removes the “use it or lose it” component of traditional long term care insurance. The money will either be used for long term care or your heirs will get a tax free death benefit.

Steve Chambers from Nationwide presented the option of adding a long term care rider onto any of their permanent life insurance policies.  Like Money Guard the Nationwide product pays for qualified long term care services including nursing home, home health care, hospice, adult day care and assisted living.  Any accumulated funds not used on long term care expenses will be paid to the beneficiaries as a tax free death benefit.

The important take away is this; the problems of how to pay for long term care aren’t going away, but you do have options. You can take some steps legally to protect your assets in advance. Traditional long term care insurance could be the right answer for your situation, but we have identified other solutions to consider that may fit your unique circumstances.  It is critical that you sit down with your planner here at Sgroi Financial to review your personal situation and see which option best fits for you. The one thing you shouldn’t do is leave it up to chance. If you are over the age of 55, now is the time to start doing some research and choosing your best plan.  As always we are here to help!

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