March 3, 2011; By: Jodi A. Weber, CLU, RHU
All About Estates
There has been discussion regarding Long Term Care Insurance. Have you wondered if it might be of benefit to you?
Case Study: Bev, age 73 and Michael, age 75. Married, two children, both married with families.
A carefully constructed Retirement and Estate Plan provided them with a $40,000 annuity which would last until their age 90. Their home, owned, mortgage free, worth $350,000 would be sold when they downsized their house as their needs changed – perhaps a bungalow or condominium. It was assumed that after fees, there would be $150,000 left to distribute to their children upon their deaths along with the value of their home.
The plan worked well on paper, however Michael was diagnosed with a very rapidly advancing Alzheimer’s disease and within months, Bev was no longer able to care for him. He became violent and could no longer perform such routine activities as using the toilet or eating. Michael needed to be moved into a facility which offered a high level of care and because of his violent behavior, the choices were restricted.
Bev and Michael had never anticipated when they created their plan years before the possibility that they would not reside together and require two separate households. While they were able to sell their home quickly, the final offer was lower than they would have liked it to be but they needed out and quick!
Because there were no spaces available in a government funded facility which offered the level of care which Michael needed, a private facility at $4,800 per month was the only option for them. Bev moved into a rental apartment at $1,600 per month.
While they had always envisioned “downsizing” together, they had never anticipated having to incur an extra $57,600 per year in long term care facility costs. The $40,000 of annuity income was enough to provide for Bev’s living costs but the extra $4,800 per month needed to come from somewhere and the only capital available were the proceeds from the sale of the home. They had less than six years of funds available for Michael in the facility. Life became very scary and worrisome for Bev. In addition to watching her husband “slip away”, she worried of what might happen if she too needed to have facility care in the future and felt that she and Michael had failed to provide for their family.
LONG TERM CARE INSURANCE is coverage which pays a daily benefit for care either at home or in a facility when two or more activities of daily living cannot be performed. $160.00 of daily benefit would have covered the full cost of Michael’s facility care and the Estate Plan could have been realized. Long Term Care Insurance needs to be considered in any Retirement or Estate Plan.Leave a reply