If you help clients prepare for long-term care (LTC) expenses, you may wish you had an elder law lawyer living in your desk.
Panicked swimmers try to drown the lifeguards who come to rescue them. Panicked consumers flail at the agents and brokers who offer them long-term care insurance (LTCI), annuities, and related products and servies.
LTCI prices are increasing. Contract terms are changing. The insured population is aging, and more of the early LTCI buyers are filing claims. Claimants and families need to squeeze as much cash as possible from the LTCI policies, because many pension plans, 401(k) plans and employer-sponsored retiree health benefit plans are delivering less value than expected. Adult children hit hard by the Great Recession need to squeeze as much cash as possible from Mom and Dad.
Kerry Peck, managing partner at Peck Bloom L.L.C., an elder law firm in Chicago, sees what happens when poor LTC planning leads to litigation.
“Money does strange things to people,” Peck says.
Peck has been helping clients with trusts, estate planning and general elder law issues for more than 30 years. He co-wrote Alzheimer’s and the Law, an American Bar Association book about the legal implications of dementia. He recently talked in a telephone interview about the major sources of LTC planning-related litigation risk.
1. Failing to warn clients about the importance of LTC planning to retirement income planning, estate planning and other types of personal financial planning.
Peck says having realistic arrangements in place to pay for LTC costs is critical to maximizing the chances that a client’s financial planning and estate planning will work.
For a client with $500,000 to $2 million in liquid assets, the cost of getting years of dementia care either at home or in a nursing home could be a big drain on assets. The need to come up with cash to pay LTC bills could also be a serious problem for clients who have large holdings of potentially hard-to-sell assets, such as small businesses or commercial real estate, and only small allocations of cash.
Making sure a client has taken the need to plan for LTC costs into account could be a way to keep children or other heirs from getting into bitter court fights, Peck says.
“Often the battle is over the cost of care,” Peck says. In some cases, he says, adult children “want the cost of care to be the cheapest possible, so they can inherit more money.” In some cases, Peck adds, adult children may try to conserve estate assets by exaggerating their ability to care for elderly parents at home.
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2. Failing to mention private LTCI or other LTC financing vehicles, such as LTCI and life and annuity products with LTC features.
The private LTCI industry has entered a tunnel of terror in recent years. The issuers have faced underwriting and investment challenges. Insurers and agents find they still have to educate consumers about what LTCI is and why consumers should consider buying it.