Long-Term Care insurance typically involves underwriting and a lot of people are declined, which means these people have no choice but to self-insure. People don’t plan to fail they generally fail to plan. When it comes to self insuring for Long-Term Care, most people don’t create a plan, they assume everything will work itself out by having plenty of money.
Here are the pitfalls of self-insuring :
BURDEN
Many of us have witnessed a loved one requiring assistance with the activities of daily living or cognitive impairment. As we all hope this won’t happen to us, the percentages are not favorable. Let’s be honest, most people grit it out for as long as possible because they feel receiving care equals sacrificing dignity. No one wants to watch their loved ones lose their dignity, so we try to stay as positive as possible and hang back until we have to step in and help. We know this from personal experience.
Our aging loved ones do not want to be a burden, but unintentionally the process typically is a major inconvenience for their kids, grandkids, or friends. You can sit back and say, “well that’s just how life goes”, or you can make a plan and lessen the burden. Time machines don’t exist, create a plan, write it down, and make it accessible. A great website for this is www.securedwishes.com, its purpose is to “bring order to emergencies, and empower your family to honor your wishes after you are gone”.
There is a high probability you will burden the people who love you the most if you do not plan. We have seen this time and time again, leaving earth without dignity is no way to go. Planning demonstrates your love for the people you care about the most.
FINANCIAL MISTEPS
Paying for Long Term Care (LTC) expenses with the wrong money in the portfolio – people who can self-insure obviously have a substantial portfolio of stocks, real estate, or other investments, this is the reason they are able to ay for LTC medical expenses. Some advisors recommend selling the house to pay for LTC expenses, we say, “Won’t they lose the step up in basis at death? Wouldn’t people rather receive custodial care in their own house? Where will the healthier spouse live, a retirement home?”
Some advisors say to use non-qualified money, we say “How will people take advantage of the unreimbursed medical expense deduction under tax code 213? Who is going to help facilitate paying the bills and transfer money from the investment portfolio and keep all the receipts in order to deduct the unreimbursed medical expenses?” Next time you are meeting with your advisors, get some clarity on their roles when it comes to their involvement with this process. Do your loved ones even know who they are? Will it be the first time they have ever had a conversation with them? If you would like our help, we welcome the opportunity to assist you in exploring how to plan for Long-Term Care.
