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Long Term Care in Estate Planning

The backbone of a solid estate planning strategy might include a recommendation to purchase a long-term care insurance policy (LTC); this, to protect assets from major health bills, such as nursing home and in-home health care costs.

In short, LTC insurance helps reduce the amount that the investor needs to withdraw from personal accounts. A retiree, for example, may have several streams of income that include social security, pensions as well as well as personal accounts in the form of savings and retirement funds—401Ks, IRA and Roth accounts.For example, if the nursing home bill is $8,000 a month, but you are only receiving $2,000 a month from social security…and maybe another $1,000 from a pension. The rest of your income will have to come from your 401Ks, IRAs and Roth IRAs to the tune of $2,000 a month.

No surprise, but major health care costs can decimate assets. For example, if the nursing home bill is $8,000 a month, but you are only receiving $2,000 a month from social security…and maybe another $1,000 from a pension. The rest of your income to meet those expenses will have to come from your 401Ks, IRAs and Roth IRAs to the tune of $2,000 a month.

Consequently, the result is $3,000 shortfall to pay the monthly nursing home bill. However, if your LTC policy pays $3,000 a month, then the shortfall is eliminated.

Another very good feature of owning an LTC policy is the option to choose between ‘in-home health assistance’ vs traditional nursing home care. The limited care you could receive in your own home—or even in an assisted-living facility—is usually defined in a policy in terms of ‘daily tasks’ you are unable to perform; for example, if you aren’t able to cook your own meals, or bathe, the policy can generally cover assistance in these areas.

Contact us to start the discussion about your estate plan, including a financial plan that will help secure your short and long-term needs.