LTC : Some probability and cost numbers

[walkinwood]

Scott Burns column answers a question from a single woman on LTC.

https://assetbuilder.com/knowledge-...-be-in-a-rush-to-buy-long-term-care-insurance

I do not have LTC insurance and given the current environment of huge rate increases, do not plan to get it either.

My knowledge of probability calculations is rusty, but I think you can extrapolate what the probabilities are for a couple from these numbers.

 

[W2R]

Scott Burns column answers a question from a single woman on LTC.

https://assetbuilder.com/knowledge-...-be-in-a-rush-to-buy-long-term-care-insurance

I do not have LTC insurance and given the current environment of huge rate increases, do not plan to get it either.

My knowledge of probability calculations is rusty, but I think you can extrapolate what the probabilities are for a couple from these numbers.

OK, I'm a single woman! Sounds interesting. So I glanced through the article. I have to admit that when I saw the following two statements I put it down....

As a single woman without children you don’t need life insurance. And with $1 million in financial assets you probably don’t need long-term care insurance

[...]suggests it is unlikely you would exhaust your assets in long-term care. My suggestion: stay calm, invest carefully, and savor a long retirement.

OK! That's just exactly what I already planned to do.

 

[mathjak107]

with those statements that article is garbage , especially with a spouse . care in our area ia 11k a month . do you just impoverish the stay at home spouse ?

who cares what statistics on this show , which side of the statistic are you on ?

don't we insure against the most remote possibility's when we do insure ? we buy life insurance at younger ages when there is near no chance of collecting , we buy fire insurance when the chances of a fire are less than 1% .

we insure these things because if it is us on the wrong side of the statistic the results can be devastating .

my dad spent 6 years in a nursing home and i saw what it did to his wife financially .

my co-worker fell painting and broke his hip .. during surgery he had a stroke which left him paralyzed at age 56 and in a home now .

i guess no one read them the statistics .

 

[MichaelB]

with those statements that article is garbage , especially with a spouse . care in our area ia 11k a month . do you just impoverish the stay at home spouse ?

There is no stay at home spouse. The article is about a single woman.

 

[mathjak107]

it still may not matter . it depends on location whether 1 million will be enough and what you intended to do with that money as far as heirs or charity ,etc . like i said we run 11k-12k a month and it escalates yearly

 

[MichaelB]

it still may not matter . it depends on location whether 1 million will be enough and what you intended to do with that money as far as heirs or charity ,etc

Are we talking about the same article? Scott Burns advice to a single woman in her 50's - that she doesn't need a life insurance policy with a LTC rider? What is wrong with that?

 

[mathjak107]

i am referring to his comment about likely not needing ltc insurance if you have 1 million bucks based on STATISTICS . things either work out for us or they don't when it comes to this stuff . without knowing which side of the statistic we are on we have to assume it is us.

no different than the safe withdrawal rate being based on WORST CASE . no different with planning until 90-95 even though statistics say most die sooner .

 

[Senator]

with those statements that article is garbage , especially with a spouse . care in our area ia 11k a month . do you just impoverish the stay at home spouse ?

No. You immediately get a divorce and split the assets. A marriage license is only a piece of paper created by the government. Long before marriage licenses existed there were marriages.

Once the State gets your half, the state pays the rest.

 

[mathjak107]

it isn't always that simple because of other ramifications as well as the courts can shoot your asset split idea down as an undisguised attempt to circumvent the Medicaid regulations concerning the appropriate level of the spousal allowance . loss of husbands ss if not married long enough or pension can be an issue as well as other things like survivor benefits . .

interesting article on medicaid divorces . blended families can have a big objection to the way the assets have to be split with the at home spouse getting most of it if the courts do approve the split . .

courts can frown on the attempts and already have .


" Simply put, despite all the planning, the court may not order a property division in accordance with what is planned. In 2005, the Superior Court of New Jersey had the following to say about a support payment plan formulated in a “bed and board” divorce: ” The property settlement agreement in this case was an undisguised attempt to circumvent the Medicaid regulations concerning the appropriate level of the spousal allowance.” H.K. v. Division of Medical Assistance and Health Services, 379 N. J. Super, 321, 329, 878 A.2d 16 (2005). "


http://www.helsell.com/helsell-news/medicaid-divorce-an-overview/

 

[walkinwood]

Irrespective of what you think of the advice, I think the numbers - probabilities, average costs - are good to know so that you can make your own decision.

Personally, I'm basing my whole ER on probabilities since the bulk of our savings are in volatile assets (Real estate, Stocks and bonds).

 

[Free To Canoe]

The article helps to clear up the whole LTC fear of the unknown thing for me.
Now I can see how to get an approximation of the costs. Very helpful for me.

 

[meierlde]

it isn't always that simple because of other ramifications as well as the courts can shoot your asset split idea down as an undisguised attempt to circumvent the Medicaid regulations concerning the appropriate level of the spousal allowance . loss of husbands ss if not married long enough or pension can be an issue as well as other things like survivor benefits . .

interesting article on medicaid divorces . blended families can have a big objection to the way the assets have to be split with the at home spouse getting most of it if the courts do approve the split . .

courts can frown on the attempts and already have .


" Simply put, despite all the planning, the court may not order a property division in accordance with what is planned. In 2005, the Superior Court of New Jersey had the following to say about a support payment plan formulated in a “bed and board” divorce: ” The property settlement agreement in this case was an undisguised attempt to circumvent the Medicaid regulations concerning the appropriate level of the spousal allowance.” H.K. v. Division of Medical Assistance and Health Services, 379 N. J. Super, 321, 329, 878 A.2d 16 (2005). "


Medicaid Divorce: An Overview · Helsell Fetterman

YOu would have to do the divorce long before the medicaid issue came up, making that a non issue. Doing so once one spouse was in LTC is to late.

 

[meierlde]

But as pointed out a single person has a different set of problems than a married couple about LTC. If you don't care about leaving anything, then just prepay your funeral and go on. (Prepaid funerals don't count towards the asset tests in medicaid). Better not to leave your nieces and nephews to pay for the funeral. (A straight cremation is on the order of 2k today).

 

[Running_Man]

i am referring to his comment about likely not needing ltc insurance if you have 1 million bucks based on STATISTICS . things either work out for us or they don't when it comes to this stuff . without knowing which side of the statistic we are on we have to assume it is us.

no different than the safe withdrawal rate being based on WORST CASE . no different with planning until 90-95 even though statistics say most die sooner .

OK so can you even tell me what LTC will cost? I see states approving 50% rate hikes and from what I can tell for a couple in their late fifties to have LTC for 12,000 per month costs and unlimited lifetime you are exceeding $18,000 per year annual premiums presently for a couple with no limit on what future increases would be.

If premiums continue to go up, which they are doing largely because of increased longevity and zero interest rates, how do you budget for this? Assume $400,000 in bank is not enough for one of you and instead save another $540,000 dollars to cover LTC premium and hope those expenses do not go up faster than your retirement portfolio? Or do you drop to a $200 a day 4 year policy-policy - for about 5,000 - 6,000 annually for the couple ($180,000 in portfolio needed for the expense) and then plan to self fund the additional shortfall how?
In the end you either need a lump of money that would be available in case of LTC or else a policy for which you need a lump of money to pay premiums.

To pay these premiums from age 55-70 only to find the increases in the future are destroying the budget is very unfair but allowed in the present circumstance. Texas approved a 75% increase in LTC for 2015 for Alliance, seems like there is no ability to price the product to me

 

[mathjak107]

there are no more plans that are unlimited . the big 50% increases were in the early plans that were .

all you need to take is 5 years insurance or in the case of state partnership plans like we have in ny 3 years . the idea is to clear the look back if 5 years to do some asset shifting , in ny the partnership plan has zero look back and all assets are protected with a total asset plan . .

then the perks are worth more than the insurance .


the state agrees to certain terms and to allow either all or some of your assets to not be subject to a look back period and need no asset shifting to irrevocable trusts so medicaid can resume paying your bills ..

some states like ny do not restrict the spouses income who stays at home like they do when you normally go on medicaid .

it is great you protected a million dollars in assets but now try drawing it to live on . medicaid will take every thing above around 3k a month in our state from the stay at home spouse .

so living in queens in nyc where we do that feature is a huge plus .


each state likely has a plan but they vary as to the perks after the insurance runs out .

 

[mathjak107]

why didn't we self insure ?

that was our plan , well it was until we did that feature story with money magazine years ago when they put their team of pros against me to see how they would better an amateurs plan .

they made me realize a few things i didn't consider.

like an insurer you really can't do much with the money you may need to pay claims with on a moments notice .

you really should not be investing the money you are self insuring with in to volatile investments .

you can't risk the fact that that money you set aside may get stuck in an extended down turn and is 1/2 of what you had or failed to grow to keep up with inflation in long term care costs . .

so that money may actually be ahead fully invested with a piece of the gains paying the premium on an actual policy ..

the last issue is something our estate attorney pointed out .

even if you preserve assets and use trusts the stay at home spouse still has to live on a very low income if medicaid is involved . all well and good you preserved the assets in trusts but now you have to live a life style as if you were impoverished .


the stay at home spouse goes in to survival mode usually too when they realize that self insuring is burning up money they may need to live and the spouse needing care often does not get that higher level of care as dollars are conserved .

usually those who say they will self insure really have no plan , they just lump everything together and hope for the best.

most of the cases involving LTC THAT OUR ESTATE ATTORNEY HANDLES ARE FOLKS WHO REALLY HAD NO PLAN OTHER THAN TRY TO SELF INSURE .

so for less than 1% of the gains on the money we are able to fully invest we have a plan that protects all the assets .

 

[mathjak107]

OK so can you even tell me what LTC will cost? I see states approving 50% rate hikes and from what I can tell for a couple in their late fifties to have LTC for 12,000 per month costs and unlimited lifetime you are exceeding $18,000 per year annual premiums presently for a couple with no limit on what future increases would be.

If premiums continue to go up, which they are doing largely because of increased longevity and zero interest rates, how do you budget for this? Assume $400,000 in bank is not enough for one of you and instead save another $540,000 dollars to cover LTC premium and hope those expenses do not go up faster than your retirement portfolio? Or do you drop to a $200 a day 4 year policy-policy - for about 5,000 - 6,000 annually for the couple ($180,000 in portfolio needed for the expense) and then plan to self fund the additional shortfall how?
In the end you either need a lump of money that would be available in case of LTC or else a policy for which you need a lump of money to pay premiums.

To pay these premiums from age 55-70 only to find the increases in the future are destroying the budget is very unfair but allowed in the present circumstance. Texas approved a 75% increase in LTC for 2015 for Alliance, seems like there is no ability to price the product to me

events requiring care happen at any age so like life insurance and fire insurance each years protection only covers that year .

if at any point we cancel so be it , we had coverage for those payments .

as i said above , we insure the remote possibility's in life that can be financially crippling , not because odds are they will happen . but because as small as the odds are it may be us .

most likely none of us will collect on any insurance we have including life insurance since most policy's are gone by the time death is a high outcome .

but rather we use insurance to mitigate severe damage if we are on the wrong side of the statistic since someone has to be .

 

[Senator]

YOu would have to do the divorce long before the medicaid issue came up, making that a non issue. Doing so once one spouse was in LTC is to late.
Medicaid Divorce: An Overview · Helsell Fetterman

True. That article was basically an advertisement for a law firm. If you do a 50/50 divorce, there should not be any issues with LTC. There are other issues, but a long married couple (10 years) will not have financial issues if they split 50/50. SS is not affected.

Conclusion
Regardless of personal views about Medicaid divorces, it is a powerful tool in estate planning. It is also a very complex tool and is not intended for dabblers. Medicaid divorce practice requires a deep understanding of family law, estate planning and state Medicaid laws.

 

[mathjak107]

depends on the state . you can't say divorce is no problem . we discused alternatives to insurance with our attorney being this is a 2nd marriage .

two very powerful laws here in ny have been upheld and according to our estate attorney who is one of the biggest in ny there are very very few medicaid divorces .

all court actions are now pretty much based on right of refusal .

our two laws that pretty much killed off medicaid divorce are :

(1) Section 5-311 of the General Obligation Law which provides that except as provided in Section 236 of the Domestic Relations Law, a husband and wife cannot contract to relieve either his or her liability to support the other in such a manner that he or she will become incapable of self support, and therefore likely to become a public charge; and

(2) Family Court Act Section 415 which provides that the spouse or parent of a recipient of public assistance or care, or of a person liable to become in need thereof, or a patient in an institution in the department of mental hygiene if of sufficient ability, is responsible for the support of such a person. The Court has the discretion to require any such person to contribute a fair and reasonable sum for such support (child up to 21 years of age).

also if it is eventually determined that a divorce is to be pursued, the divorce needs to satisfy all of the requirements of the Domestic Relations Law, such as establishing one of the requisite grounds for a divorce. This may be difficult to accomplish because of the illness or disability of one spouse

 

[donheff]

A number of the issues Mathjak points out fueled my decision to get an LTC policy. But I am married and want to leave a substantial estate for the kids. If I was single I would still do it to preserve my spending in old age. I would not want to risk depleting my assets to Medicaid levels.

 

[meierlde]

A number of the issues Mathjak points out fueled my decision to get an LTC policy. But I am married and want to leave a substantial estate for the kids. If I was single I would still do it to preserve my spending in old age. I would not want to risk depleting my assets to Medicaid levels.

Although if single conversely if you were single and needing LTC what else could you realistically spend your money on?

 

[walkinwood]

all you need to take is 5 years insurance or in the case of state partnership plans like we have in ny 3 years . the idea is to clear the look back if 5 years to do some asset shifting ...

First of all - thanks for sharing these nuances.

Can you elaborate on your statement above?

If I read it correctly, it means that if I can finance x years of nursing home care (if x is the look back period) without crippling our portfolio, we should be fine - as long as we take action to do asset shifting.

I don't understand what "asset shifting" means.

Lastly, can you link to the Money article? Thanks.

 

[Running_Man]

there are no more plans that are unlimited . the big 50% increases were in the early plans that were .

all you need to take is 5 years insurance or in the case of state partnership plans like we have in ny 3 years . the idea is to clear the look back if 5 years to do some asset shifting , in ny the partnership plan has zero look back and all assets are protected with a total asset plan . .

then the perks are worth more than the insurance .


the state agrees to certain terms and to allow either all or some of your assets to not be subject to a look back period and need no asset shifting to irrevocable trusts so medicaid can resume paying your bills ..

some states like ny do not restrict the spouses income who stays at home like they do when you normally go on medicaid .

it is great you protected a million dollars in assets but now try drawing it to live on . medicaid will take every thing above around 3k a month in our state from the stay at home spouse .

so living in queens in nyc where we do that feature is a huge plus .


each state likely has a plan but they vary as to the perks after the insurance runs out .

OK So i see you are a big fan of LTC insurance, but I am a pragmatic man what will it cost me? That you did not answer. How much should I budget long term in order to obtain this insurance? I see from this Long-Term Care Insurance Premiums Rise Almost 9 Percent | ElderLawAnswers that average increase for NEW policies in 2014 was 9 percent in a year of 1 percent inflation. Average for older places existing in place is far higher.

To state that insurance if paid is good because you were covered for a time if it becomes too expensive is wasting resources to me because an alternative plan is to take a pile of money and move into a CCRC community and let the entrance fee cover eventual need of long term care in place .

Since most people need long term care when they are elderly and not when they are 55 to pay premiums from ages 55-75 and then stop because you can no longer afford it and claim you had good insurance in the meantime at 5K per year rising at 9 per cent per year is not a good use of assets for a low risk event in my mind.

From age 55 with a 7 percent higher than inflation premium cost increase for a couple goes from 5K per year to 19K per year at age 75 and consumes $225,000 in real dollars or 50% of a reasonable estimate of total needed for LTC. If you earn just 3 percent over inflation the cost of the insurance with those assumptions to age 75 rises to nearly 300K, and you are only then getting into the age most likely to use LTC. 300K at risk for a million dollar portfolio seems too much for peace of mind to me

 

[mathjak107]

First of all - thanks for sharing these nuances.

Can you elaborate on your statement above?

If I read it correctly, it means that if I can finance x years of nursing home care (if x is the look back period) without crippling our portfolio, we should be fine - as long as we take action to do asset shifting.

I don't understand what "asset shifting" means.

Lastly, can you link to the Money article? Thanks.

the article is in the march 2006 issue so it isn't posted on cnn any more .

it was up there for quite a while.

asset shifting means using irrevocable trusts or other legal means to protect assets after the insurance runs out .

 

[donheff]

Although if single conversely if you were single and needing LTC what else could you realistically spend your money on?

If I was single I would still want to leave an estate to my kids. But, even more importantly, LTC is not synonymous with end of life. It is entirely possible to need LTC - say for a broken hip - and then be back on your own. It would be nice to come out of rehab to a thriving portfolio rather than to SS and pensions with nothing else.