Long Term Care Planning Strategies

Insurance is not the only answer!


I’m sure you have noticed that the premiums for long term care insurance (LTCi) have gone up over the years. My experience is that, especially for older individuals, the premiums are getting out of reach. With the cost of care in CT soaring well beyond $100,000 per year, coupled with the passage of the Deficit Reduction Act, in 2006, good long term care planning strategies are more important than ever before.


As a result of this, I have developed a hybrid plan which has been well received by clients. By combining LTCi with either proper gifts and transfers or protected income accounts, we are able to protect assets and better manage their long term care plan.


Here is the strategy that we implemented for a couple who we recently helped. Mary and John Smith (names have been changed), both 65 years old, were concerned about protecting $500,000 in assets. They were aware of the Medicaid asset protection that the Connecticut Partnership offered. However, when I showed them the premium for protecting $500,000 with a LTCI policy, there was some sticker shock.


We discovered that they had $200,000 in the bank. These dollars were not being used for living expenses. They wanted the money there for peace of mind. Through a carefully executed transfer strategy that was prepared in conjunction with an elder law attorney, we repositioned those dollars and were able to make them part of an overall long term care planning strategy.* As a result they only needed to purchase a $300,000 LTCi policy. At the end of the day, we were able to put in place a strategy that protects the $500,000 in assets while reducing their LTCi premiums by $ 2,713 per year.


$500,000 of LTCI:  annual premium $7928 versus $300,000 of LTCi:  annual premium $5215


Please note that these lifetime benefits grow at a rate of 5% compound, as does the subsequent asset protection.


As for the $200,000, it is imperative that this be properly transferred into an asset that has all of the following characteristics: grows tax deferred; pays off tax free to beneficiaries upon death; isprobate free: must be properly set up to protect these dollars from long term care illness.


Additionally, it is vital that this $200,000 be both free from market risk while remaining 100% liquid. This is due to the transferee liability law in the State of Connecticut.


In short, this unique hybrid solution gave John and Mary what they were looking for: peace of mind and affordability.


*Please note, that the 5 year lookback period is in effect.


Please contact me so that we can discuss how these strategies can benefit your clients and your practice!