LifeHealth.com
Integenerational LTCi Planning
by Jim Ryan
Jim Ryan is president of Lenox Long Term Care, a division of Lenox Advisors, New York. He can be reached at jryan@lenoxadvisors.com
Most financial planners pride themselves on providing holistic planning for their clients. Rather than simply talking about specific products, as financial professionals we are trained to identify the goals in our clients' lives and to try find out what's important to them. We may put a label on our business such as retirement planning, insurance and estate planning, or asset management. However, if we do our jobs correctly we hope that our clients will say that our business is helping them take care of their family.
If helping our clients take care of their family is what we do, then we should not ignore the long term care needs of our clients' parents. Simply put, we are not doing our job if we are not inquiring about the potential long term care needs of our clients' parents.
While every fact find I have ever seen asks the client if they have children, very rarely do I see one asking about one's parents. Children are (among other things) a financial obligation and have to be taken into account when making recommendations.
Married clients in their 30s or 40s will most likely have multiple parents in their 50s, 60s or 70s. If you have two parents and two in-laws over the age of 65, the odds are extremely high that one of them will need long term care for an extended period of time. If a parent without many assets needs care, it is also almost certain that the rest of the family (your spouse, siblings, and the healthy parent) will turn to the most successful child in the family for help.
Nothing quite tears up a family more than issues involving paying for a parent's long term care. "You can find money for fancy cars and vacations, but you put our Mom in a Medicaid-approved nursing home." "Sure, Mom and Dad found the money to put you through law school and now that they need help, where are you?"
In addition, the changes in determining Medicaid eligibility have made it much more difficult to transfer assets out of one's name. The new five-year look-back penalty period for any assets transferred out of your name is not an easy obstacle to overcome when you are trying to preserve assets and qualify for Medicaid. Clients (or their siblings) who may be counting on an inheritance will be in for a rude awakening once the effects of these changes to Medicaid are felt.
The challenge is to get the client to bring up long term care insurance with their parents.
In almost all instances, people take out long term care insurance on their parents because they love them and they want them to receive the best possible care.
If you are not talking about long term care insurance with your clients, then you are not addressing something in their lives that is probably very dear to them.
Bringing up the topic of long term care insurance with a younger person for their parents is not difficult. Many of them see what their parents are experiencing or did experience with a grandparent. The conversation starter is simple. "Did your grandparents need long term care?" A little probing will most likely reveal it was very difficult both financially and emotionally, and they want to do everything possible to make sure it doesn't happen to them.
The challenge is to get the client to bring up long term care insurance with their parents. Most parents think they are either too young for this coverage or too old. For younger parents (50s or early 60s), the carriers have plenty of prepared material to demonstrate why you should do it sooner rather than later. At older ages, plan designs can be selected to help keep costs down. The argument with older parents (late 60s or 70s) is that it is doable but that it is a now-or-never situation.
The cost of this insurance has been escalating for new policyholders. In addition, the carriers have tightened up the underwriting requirements. With these developments, it's even more important to have your clients discuss this with their parents at younger ages.
In any event, letting your clients delay the uncomfortable conversation of long term care insurance for their parents only leads to the difficult conversation once it's clear that a parent is going to need long term care. With the cost of care easily exceeding $100,000 a year in some parts of the country, the conversation of how are we going to pay for home care or a better assisted living facility rather than a nursing home provided by Medicaid can be devastating.
If you are recommending long term care insurance to your clients' parents, then you also want to make sure you are recommending the right level of coverage for them. When you work with your clients in obtaining coverage for their parents, it is very likely they will need care and utilize the insurance during the course of your relationship.
Most financial planners strive to forge long-lasting relationships with their clients. Nothing cements a relationship as much as having a long term care policy deliver on its promise to keep your client's parent in their own home without having to worry about money. On the flip side, nothing can ruin a relationship quicker than a promise not kept. If you are not prepared to invest the time needed to be proficient with this coverage, then you should look to work with someone who is.