Background: Long-Term Care (LTC) expenses are one wildcard that can significantly alter the course of a client’s financial future. Often times if someone has indications of needing care or significant health issues, obtaining such coverage can be a challenge.
Our Case: B&E presented our PathWise Financial Plan for George and Mary many years ago. In this process, we made a recommendation for Long-Term Care coverage, which the client elected not to pursue. At that time, the client believed they could “self-fund” this risk. Fast forward a few years and we get a call about potential early dementia concerns, and suddenly Long-Term Care coverage pops to the top of their priority list.
Knowing this couple as well as we do, we know that access to the cash will continue to be important but finding a way to multiply that available cash should this Long-Term Care event surface would be essential. We also know that this will be a challenge as Mary has Type 2 Diabetes, and George is showing potential early signs of dementia.
B&E opted to provide five possible Long-Term Care strategies. Two of the five strategies were immediately eliminated as options for George and Mary: 1) self-funding was no longer desirable, 2) while traditional “use it or lose it” would have lower initial cash outlay, there would be no access to cash values or any death benefit. We offered the remaining three strategies: Simplified Issue Universal Life with LTC Rider, Whole Life policy, and a Variable Annuity contract.
The Results: Mary would not qualify for the first strategy as Type 2 Diabetes is an automatic decline. With her diabetes under control, she still could qualify for the second option, yet she elected to use the Annuity Solution. She believes that Long-Term Care is not likely to be a concern as her family has no history. This option provided a nice, potential death benefit and allowed her IRA to be used for funding; thus, reducing the liquid cash outlay. George, showing possible signs of early dementia, elected the first strategy, which we knew could be challenging for underwriting. The higher benefits were worth it. We knew if this alternative was not successful, we can always pivot to the second or third strategy. He did end up passing the memory test, which was a big relief!
Bottom Line: There are many ways to “slice and dice” this type of coverage. The current health of the client, funds available now and in the future, as well as likelihood of eventual claim are all individual factors. Clients that originally felt this was not a concern are now able to have peace of mind that should such an event occur, there will be additional funds available to help supplement any cost of care.
This is a hypothetical example for illustrative purposes only. The experience of this client may not be representative of the experience of all clients and is not indicative of future results. Any tax advice contained herein is of a general nature and is not intended for public dissemination. Further, you should seek specific tax advice from your tax professional before pursuing any idea contemplated herein. This advice is being provided solely as an incidental service to our business as financial planner. Securities offered through Valmark Securities, Inc. Member FINRA, SIPC. Financial Planning and Investment Advisory Services offered through B & E Investment Advisers, Inc., a State Registered Investment Adviser, Business & Estate Advisers, Inc., B &E Investment Advisers, Inc. and B&E Pension Advisers, Inc are separate entities from Valmark Securities. (1) Names have been changed to protect the identity of the client.
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