Using Long-Term Care Policies in your Estate Plan

As we live longer, there have been unexpected costs associated with it. For those who need long-term care (LTC), the needs can range from simple tasks such as bathing, getting dressed/undressed and eating to more skilled care provided by nurses, therapists, and other professionals. These services can be very expensive. Depending on the level of care needed, the average cost of staying at home is around $253 a day or $92,345 a year! To make is worse, there has been an average 4% annual inflation. Those who have to go into a facility face even higher costs of approximately $120,000 a year.

Once faced with these added expenses, families then have to figure out how to use their available assets to care for a loved one while providing assets for their spouse who may also need LTC, not mention being able to leave their family something once they pass. While Medicare provides some financial assistance, it is limited. To cover these costs and/or gaps in coverage, many look to purchasing long-term care insurance. Another option, which is not often spoken about is purchasing a hybrid life insurance policy. This type of policy includes LTC and life insurance.

For those interested in maximizing flexibility of having access to the fund to pay for LTC, protecting their assets from a Medicaid spend down and lowering taxes, they should look to creating an estate plan. Hybrid life insurance policies can be placed in an ultimate life insurance trust (ULIT), which allows an individual to leverage several financial benefits. First, assets placed in an irrevocable trust with the trust as the owner are removed from the individual’s estate. Once taken out of the estate, these assets are protected from Medicaid and are not included in calculating during the spenddown. An experienced estate planning attorney can draft the trust to pay for any long term care need. The trust would provide a death benefit to a spouse or other designated beneficiaries. If the insured never uses all of the LTC benefits, the remainder plus the death benefit and any accrued interest will pass to whoever is named as the beneficiary tax-free.

Coupling LTC insurance in an estate plan provides flexibility with asset protection while preventing all of one’s assets being used for one’s care. The reality of modern medicine helping people live longer means that there is a longer time that people need LTC, and there are hefty expenses associate with it. Long-term care insurance can be a powerful tool which allows individuals to live out their “golden years” as comfortably as possible. Working with a knowledgeable attorney can relieve financial and emotional stress and provide many benefits to your loved ones.

If you would like to speak to an attorney about whether incorporating long term care insurance in your estate plan can you, call our office to make a consultation.

Located in Merion Station, Pennsylvania, Sallen Law assists clients with estate planning matters throughout the Philadelphia, Main Line area including but not limited to Lower Merion Township, Montgomery County, Bucks County, Delaware County, and Chester County. Attorney Sallen is also licensed to practice in the state of NJ and serves Burlington County, Gloucester County and Camden County.