“Long Term Care Planning: Is It Important and What Options Are Available?

Posted on 11.13.17

“Long Term Care Planning: Is It Important and What Options Are Available?

It is our goal as tax and accounting advisors to go beyond traditional tax preparation and identify tax savings and planning opportunities for each of our clients. With that in mind, we are sharing an article by Eric Hieber, principal at BCG Companies. In this article, Eric shares insights highlighting the importance of long term care planning and current available insurance options.  

We hope you find this article informative and if you would like to learn more about life insurance planning, please contact your Keiter representative or Email | 804.747.0000.


Long Term Care Planning: Is It Important and What Options Are Available?

As baby boomers transition into retirement, the cost of care rises and life expectancies continue to increase, Long Term Care (LTC) is becoming a critical concern for families. In some cases, there is a legitimate concern about running out of resources and depleting a lifetime of savings. In others, parents are worried about becoming a burden for their children or losing the ability to live at home. LTC insurance products have evolved considerably in the past several years to provide clients with multiple choices to meet this emerging need.

LTC insurance plays a vital role in protecting against an unforeseen illness. This is not dissimilar from Disability Insurance. The key difference is Disability Insurance is designed to replace income lost as a result of illness during working years and LTC Insurance is designed to offset the costs incurred because of an illness, typically after retirement. In many circumstances, Disability and LTC insurance work in tandem with one another – LTC insurance covers the risk after the Disability Insurance terminates at retirement.

Three Types of Clients

In our experience, there are three potential buyers for LTC insurance:

  • Buyer #1 – Families with modest resources
    • These buyers have the greatest need because of the high likelihood they will liquidate their life savings in the event of an extended illness
    • Because of their limited cash flow, they typically cannot afford the proper coverage
  • Buyer #2 – Families with greater resources but not enough to “self-insure”

    • These buyers have a risk of liquidation of substantial assets in the event of an extended illness but will likely not use up all of their assets
    • They have sufficient resources to properly fund an LTC policy
  • Buyer #3 – Wealthy families with sufficient assets to self-insure

    • These families will not use a substantial portion of their estate for LTC needs – with or without insurance
    • LTC for this buyer is a hedge against self-insuring and often a psychological purchase
Since LTC products first came on the market, they have evolved to where there are now 3 basic product alternatives. The following section summarizes these alternatives.
 

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About BCG Companies 
In 1988, BCG was founded on a simple premise: Serve the specialized insurance needs of affluent families and corporations.

Eric Hieber, Principal 
Eric oversees the case design team and is responsible for managing client relationships in both the wealth transfer/estate planning and nonqualified executive benefit planning markets. In addition, he works directly with our clients and their advisors to design, implement and administer customized plans to meet their specific needs.

The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.