What If Your Client Already Needs Long-Term Care?

Your clients should eat properly, exercise, write thank you notes and buy adequate long-term care insurance when they’re young and healthy.

Sometimes, they don’t. What if Jane Doe, a successful 40-year-old lawyer, walks in and already has severe kidney disease? Can you offer her any options for planning for long-term care costs?

Kim Beil, a vice president at Janney Montgomery Scott, says you can, by considering options based on savings arrangements or deferred annuities.

What it means: It’s important to have ideas about how to help the client in front of you, as well as the hypothetical client who does everything right.

The ideal: Beil, who is head of insured and cash solutions at Janney, holds the certified financial planner (CFP) and certification for long-term care (CLTC) designations.

Beil said in an email interview that advisors should encourage clients to apply for medically underwritten long-term care planning products, such as stand-alone long-term care insurance, by the time they’re around 55.

“If you wait too long, the premiums could significantly increase,” Beil said.

Too often, she said, clients think about long-term care planning when they’re between 60 and 65 and already have health conditions that make getting through underwriting difficult.

Jane Doe: What can you tell a relatively young client who already has a serious chronic condition?

Beil said one strategy to consider is looking hard for stand-alone long-term care insurance.

Someone with a serious health problem will have a hard time getting that at a reasonable price, she said.

But some insurers might offer a policy with provisions aimed at applicants with health problems.

For some clients, she said, a second option might be using an income annuity.

If Jane Doe is already about to begin using long-term care, she could pay for known long-term care expenses by putting cash in a single-premium immediate annuity.

If she was not using long-term care care but expected to need care at some point in the future, she could buy a single-premium deferred annuity.

The tax treatment for annuities designed to pay for long-term care might be more favorable than the tax treatment of ordinary annuities, Beil noted.

Long-term care annuities can be issued up to age 80. The annuities don’t require a medical exam, and the applications usually have fewer questions than stand-alone long-term care insurance applications, Beil said.

A third strategy to discuss is use of savings or investments to self-insure.

Finally, most clients with assets will want to avoid depending solely on Medicaid to pay for care, partly because of an aversion to depending on a program designed to serve the poor and partly because of the reality that many high-quality assisted living facilities and nursing homes refuse to take Medicaid.

But some high-quality care providers in a community may make care available to patients who pay the full private-pay price for several years and then end up qualifying for Medicaid.

Jane Doe’s advisor should know which high-quality nursing homes and assisted living facilities in her area will make beds available to patients paying with Medicaid and what the eligibility rules are for patients converting to Medicaid.

Kim Beil. Credit: Janney