Studies show that the majority of people retire earlier than they expected or intended. In most cases, this means that they have less money saved for retirement than they anticipated.
It is important, when planning for retirement, to also plan for the possibility that you may be forced to stop working early due to illness or disability, or that you will suffer an illness or disability after you have stopped working, which will increases your costs in your later years.
The probability that you will need long-term care is high, and those costs should be taken into consideration as you plan for the future. Long-term care can refer to a variety of services, including assisted living facilities, live-in care or nursing homes. Long-term care costs about $75k a year, on average.
Whether you are planning to pay for a live-in aid or depend on a family member (be sure they know they are a part of your plan), you will want to ensure that your finances are in order so that lack of money does not limit your options for care. Long-term care insurance can help supplement the costs of long term care.
There are a number of insurance options to consider:
Traditional policies
Although most long-term care policies used to provide benefits for the remainder of the policy holder’s lifetime, such plans are generally not available anymore. Today’s policies tend to limit the benefits available, sometimes to the point where the policy is not worth having. If you are considering this kind of policy, be sure that you understand the coverage details before you buy.
Asset-based or linked benefit policies
This kind of policy is regulated, like a life insurance policy. You can pay into the plan for up to 10 years, and have a guaranteed benefit amount. With this policy, you can draw money based on the coverage you have. When requesting benefit payout, the insured must satisfy the requirement of needing long-term care. Most policies define this as needing assistance with 2 of 6 defined activities in day to day living. With this type of policy, if you decide you don't need it anymore, you can surrender the policy and get back the money you paid into it. If the insured person passes away before using the policy benefits, there is a death benefit that gives a significant amount of money back to the beneficiaries.
Permanent life insurance policies
This option is an addition to your regular life insurance policy, adding what is called a long-term care rider to your policy. This gives you access to your death benefit early – meaning that as long as you meet the same qualifications (assistance needed for 2 of 6 activities for daily living) you may use a portion of your death benefit to cover your long-term care. With this add-on, you are deducting from your life insurance policy early, meaning that less money will be available to your beneficiaries when you pass away.
Having a conversation with your financial advisor can help you determine how to best prepare for the possibility of needing long-term care. Making a plan ahead of time – and keeping it up to date as life changes – is the best way not only to get the care you need, but also to protect your family and your assets after you pass and prevent a dispute.
The attorneys at Gaslowitz Frankel have more than 30 years of experience navigating will and estate disputes. If you have concerns that your estate plan may be susceptible to a dispute, we can help guide you in the right direction. Contact us today at 404.892.9797.
