In recent months, we have witnessed the government throwing a life preserver to drowning businesses through a $700 billion economic bailout package. As agents, advisors, brokers and planners, we also have a responsibility to help our clients and prospects avoid their own financial crisis by helping them to plan adequately for their future.
One of the ways we can do this is through long term care planning. The government continues to send numerous messages that LTC and its associated challenges are the consumer’s financial responsibility. So, no bailout for people needing costly LTC.
A great deal is being written about long term care, LTC planning and the consequences that may be faced by our clients and prospects who have not prepared properly for this need. Often, those who have not planned for LTC have not truly considered the collateral consequences their family and friends could experience. With the financial market fluctuations we are experiencing, LTC planning may be even more critical now.
Here are the basics points to cover in the LTC planning conversation.
o How are clients spending their income stream? What portion of it are they spending? Maybe they are spending most or even all of their income and saving far too little for future needs. You may discover that even retired clients are continuing to carry such financial promises and obligations as helping their children, funding their grandchildren’s education costs or caring for disabled children. Many also have financial commitments to their house of worship, community, and charities.
o Discuss how to pay for LTC. How would the client or prospect expect to pay for any long term care needed–with their principal, or with interest earned on their principal? The average monthly LTC premium can range roughly from $200 to $300 per month. This figure depends on both the age of the client and on what decisions they have made about each of the individual LTC planning issues. Even in the current economic landscape, this $200 to $300 could be considered a bargain, because proper LTC planning can shield both the client’s assets and his or her income stream.
o Talk about the challenges of caregiving. Discuss the consequences that could await their families and friends if they opt for inaction instead of planning. By default, their family would be their only plan. Caregiving can place an emotional, physical and financial toll on family and friends. There are many repercussions, such as the damaging effect on the caregiver’s physical health, financial issues for those who are funding the care and relational strains among family members.
o Point out that effective LTC planning can help ease those areas of tumult and stress. Such a plan enables clients and their families to have the option to manage care and its associated challenges directly should the need arise, or else to manage whatever trained person or entity, such as an assisted living facility, is chosen to handle the LTC needs. Managing care instead of providing it directly can save clients or their families from disruption of lives, relationships and careers.
o Use the government’s messages to educate your client. Many people respond to LTC and its associated challenges with questions, concerns and hesitation or even inaction. Advisors and planners need to be able to educate clients that there really is no one who is going to finance LTC for them. Only those that qualify for means-tested income and asset levels set by individual states can turn to the government for help. So be sure to educate your clients about the messages the government has been sending to consumers about these issues. These messages reinforce the point that there is not going to be any government bailout if they need LTC.
Some of the government’s actions that demonstrate this message:
o Medicare and Medicaid reform.
o State LTC Partnership programs.
o State-backed “Own Your Future” programs, which make available information from the Centers for Medicare & Medicaid Services, supported by messages from each state’s governor.
o The Deficit Reduction Act of 2005, including its provisions for tax deductibility of LTC premiums.
o The federal LTC Insurance Program, designed specifically for federal employees and backed by 2 of the country’s top insurers, to help protect government workers and their families with future LTC needs.
The obvious message from all these programs: If our government were intending to give any meaningful reimbursement for custodial care to people with financial means, why would it have developed these programs?
Finally, to be effective in assisting clients with LTC planning requires that you get adequate education to be certified to sell LTC insurance, such as one of the courses required by states for selling Partnership plans. That’s the way to ensure that you can give your clients the benefit of intelligent and informed discussions of solutions to this urgent need.
Corey Rieck is founder and president of LTCcompass, Atlanta, Ga. You can e-mail him at [email protected]