Comparing Strategies to Pre-Plan for Long Term Care Costs

Today’s blog post continues the series about possible ways to plan ahead to protect against long term care costs.

My December 11, 2014 post discussed doing nothing ahead of time to protect your assets against the possibility of long term care costs in the future.

Previously, my blog discussed giving money away as a method to plan ahead for protection against long term care costs.  My post of September 19, 2014, the first installment of the discussion on gifting, described how the Medicaid “Aged, Blind and Disabled” program and the Department of Veterans Affairs “Pension” (aka VA “Aid and Attendance”) program look at assets given away.  My post of September 25, 2014 discussed transferring assets to a trust for protection against long term care costs.  My post of October 2, 2014 discussed transferring assets to a Limited Liability Company for protection against long term care costs.  My post of October 9, 2014 discussed transferring assets to your children (or other family members) for protection against long term care costs.  My post of October 16 discussed transferring assets to a charity as a way to protect against long term care costs.  My post of October 23, 2014 discussed transferring assets to your spouse as a way to protect against long term care costs.  My post of November 26, 2014 compared the various gifting strategies.

Before that, my blog discussed long term care insurance as an approach to planning ahead for long term care costs.  In the long term care portion of this discussion, my post of May 22, 2014 discussed whether to buy long term care insurance at all.  My post of May 29, 2014 suggested looking for a stable, proven insurer.  My post of June 5, 2014 described how to identify a proven, stable Long Term Care insurance company.  My post of June 12, 2014 discussed the importance of protection against inflation. My post of June 19, 2014 suggested planning to use insurance to pay for four or five years of long term care.  My post of June 22, 2014 suggested a daily rate to choose when purchasing long term care insurance.  My post of July 10, 2014 advised to look carefully at the list of Activities of Daily Living that can trigger coverage from the long term care insurance policy.  My post of July 17, 2014 described the differences between a “period of time” kind of coverage and a “pile of money” kind of coverage.  My post of July 25, 2014 advised to make sure that the long term care insurance includes coverage for cognitive impairment.  My post of July 30, 2014 described the differences between tax-qualified and non-qualified policies.  My post of August 5, 2014 discussed the value of long term care insurance policies that qualify for the Partnership program.    My post of August 14, 2014 discussed hybrid policies that combine long term care insurance with life insurance.  My post of August 21, 2014 described how a long term care insurance policy with a return of premium rider can be used to construct a “hybrid” life insurance/long term care insurance policy.  My post of August 28, 2014 described how to use a partnership policy to protect just enough of your life savings while holding down the cost of the insurance.  My post of September 5, 2014 described how to coordinate long term care insurance with potential veterans benefits.  My post of September 12, 2014 discussed how an elder law attorney can help maximize the value of long term care insurance.

The introductory post in the series on planning ahead for long term care costs appeared on May 15, 2014.

Today’s post compares the possible strategies for planning ahead for long term care costs previously discussed in this series.  We will use the criteria for comparison set out in my post of May 15, 2014.  (It’s hard to believe that this discussion goes all the way back to May.)  Those criteria are:

  • Your level of worry about long term care costs,
  • Cost to implement the strategy,
  • Risk of abnormal loss of assets,
  • Convenience to implement,
  • Control over your money, and
  • Likelihood of success.

 

Long Term Care Insurance

  • Great at relieving worry about long term care costs;
  • Relatively expensive to implement compared to the other pre-planning strategies (but still inexpensive compared to long term care costs);
  • No risk of abnormal loss of your assets (just your normal investment risks);
  • Convenient to implement (just buy a good policy);
  • You keep control over your money;
  • High likelihood of success in protecting your assets if you get an elder law attorney to help you at the time you need care.
    (If you don’t protect your assets when you first make a claim against the policy, you are putting those assets at risk, and you are failing to get full value from the policy.)

 

Giving assets away

  • Good, but not great, at relieving worry about long term care costs (You might worry whether you’ve given away too little or too much);
  • Inexpensive to implement;
  • High risk of abnormal loss of assets (you’ve put your money at the mercy of someone else);
  • Convenient to implement -just give stuff away (a gift tax return may be necessary);
  • You completely sacrifice control over your money;
  • Medium likelihood of success in protecting your assets from long term care costs
    (You have to hope that the look-back period, currently 5 years for Medicaid, passes before you need long term care.)

 

Do Nothing

  • Very little or no relief from worry about long term care costs (except for people who have the “I’ll deal with it when it happens” attitude);
  • No cost to implement;
  • No abnormal risk of loss of assets (just the normal risk of your investment choices);
  • Convenient to implement (What could be more convenient that doing nothing?);
  • You maintain control over your money;
  • BUT there is little chance of protecting the bulk of your assets from long term care costs.
    (Frequently, an elder law attorney can help save something, even at the time you need long term care, but rarely can the bulk of your assets be saved.)


There is no clear winner that fits everyone.  No two people have the same risk tolerance, and, likewise, no two people have the same level of desire to keep control of their assets.  The differences among these strategies are big enough that you might like one approach while your neighbor prefers a different approach.  It good even be your spouse that has an opinion different from yours.  (That would be a tricky plan to figure out.)  Pre-planning for long term care costs is not easy stuff.

Above all else, please remember that the strategies discussed in this series are for long term care PRE-PLANNING (i.e., when you are worried about, but don’t yet need, long term care.)  The analysis in this series is not appropriate for someone who needs care now or will probably need care within 5 years.

Note:  Don’t count on a blog post the next two weeks because of Christmas and New Years.  I might publish blogs during those times but probably not.

For more information, visit Jim’s website.

Jim Koewler’s mission is
“Protecting Seniors and People with Special Needs.”

For help with long term care or with planning for someone with special needs,
call Jim, or contact him through his website.

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