Eaton Financial Group

CONNECT

Address:

3111 North University Drive, Suite 404
Coral Springs, FL 33065

Phone:

(954) 575-9323

Fax/Other:

(954) 573-6546

 

 

 

 

 

 

 

 

 


LONG-TERM CARE:  SUMMARY

Long-term care insurance is an excellent example of how the rules of money have changed. Many people have not dealt with this subject for a simple reason: until very recently, nobody ever had the need.

For example, in ancient Greece, life expectancy at birth was 20. When the declaration of Independence was signed, life expectancy was still just 23; the median age was 16. Even as recently as 1900, most Americans died by age 47. These figures are confirmed by the percentage of Americans who reach age 65. In 1870, only 2.5% of all Americans made it. By 1990, that percentage had increased fivefold, to 12.7%. Today, 35 million people are over 65—and the figures continue to grow.

The reason we have devoted this space, in this level of detail, is that most clients consider long-term care daunting. Also, in most cases it is a significant risk management component of a sound financial plan.

Long-term care is NOT just an insurance policy. it is a concept to be integrated into an overal financial plan.

It is an approach to help ensure that you are able to make choices about how you access your care, if needed. Also, it is a way of ensuring that your family is not forced to become your primary caregiver and finally, it is a means with which you may preserve your assets.

 

LONG-TERM: DEFINED

This is the type of day-in-day-out care required if you have a serious long term care illness or disability.

LTC policies generally cover skilled, intermediate and custodial care whether the care is provided in your own home, an adult day care center, assisted-living facility, group home specific conditions such as Alzheimer’s or, if necessary, a nursing home.

 

 

 

 

 

 

 

 

 

 

WHAT ARE YOUR CHANCES OF NEEDING LONG TERM CARE?

  • Sixty percent of people over 65 will require long term care at some point in their lives. As people age, the probability they will need long term care also increases.1

  • People between the ages of 18-64 make up 40% of the people needing long-term care.2

  • Although there are about 3.2 million people in nursing homes, there are another 22.4 million who receive care at home, in adult day care facilities and in the growing assisted-care living setting.3

A survey by AARP and the National Alliance for Caregivers indicates that almost 25% of the American households are currently providing informal, unpaid care for an older friend or relative.4

 

WHAT IS THE COST OF HOME CARE?

  • Most people prefer to receive care at home for the longest possible time.
  • Proper LTC insurance coverage can delay or even eliminate the need, in some situations, for nursing home care.

 

WHAT IS THE COST OF NURSING HOME CARE?

  • Nursing homes can cost as much as $40,000 to $70,000 per year. 5

  • Depending on the facility and the area of the country, an average nursing home stay can reach $160,000 or more.6

  • If inflation continues in the future at the same rate as 1980-1995, in ten years the average financial risk of long term care will be $188,260 and in 20 years it will be $300,864. 7

  • Without long term care insurance, half of all couples, where one partner requires long-term care, are impoverished within one year. 8

 

WILL MEDICARE AND MY HEALTH INSURANCE PROVIDE FULL BENEFITS?

  • No. These programs are intended to cover hospital and physicians’ cost, not long-term care expenses.

  • Many of those who enter and pay for nursing home care out of their own savings deplete their entire savings and therefore must apply for Medicaid, the government program for the financially impoverished.

  • Those who have accumulated significant assets for retirement are most at risk.

 

 

 

 

 

 

 

 

 

 

ARE THERE ANY TAX ADVANTAGES TO PURCHASING LONG TERM CARE INSURANCE?

  • Yes. The federal government passed the Health Insurance Probability and Accountability Act of 1996, which provides tax incentives to people who purchase tax-qualified long term care insurance plans. These incentives, subject to limitations, include:

  • LTC insurance benefits received by a claimant will be tax free to the recipient.

  • LTC insurance premium are deductible as a medical expense for those who itemize (see below)


FEDERAL DEDUCTIBILITY (2011)

  • If you itemize your deductions, you may be able to deduct up to $4,240 of your total policy premium as a medical expense.

  • Add the $4,240 to your other deductible medical  expenses

  • You may deduct any amount that is OVER 7.5% of the adjusted gross income on your federal income tax return. 

*** State tax Credit: Certain states also offer a tax credit for a portion of the premiums paid (ask your CPA for exact details):

  • For instance, if you live in NY, our NY State tax credit would equal 20% of your total premium.

  • For example, if your premium were $3,500, you would receive a credit of $700 applied to your NY State taxes

  • Not every state offers this credit.

 

 

2011 deductible limits (IRS Section 213(d)(10)) for eligible long-term care premiums includable in the term ‘medical care’ are as follows:

 

 

 

 

 

 

 

Attained age before end of tax year                   2011 Limitation

40 or Less                                                                $340

41-50                                                                        $640

51-60                                                                        $1,270

61-70                                                                        $3,390

71 or more                                                                $4,240

** The per-diem limitation for periodic payments is $300.

** Source: IRS Revenue Procedure 2007-66 (2010 limits); Section 213(d)(10)

** This limitation is calculated separately for each spouse, so a 53 year old and a 63 year old couple have a $1,270 and $3,390 deductions respectively; which can total $4,660

**Any benefits paid under this policy are non-taxable.

 

Sources:

(1] The Washington Post, April, 1996

[1] Employees Benefit Research Institute Issue Brief, July, 1995

[1] Brookings Institute, The Caregivers, 1995

[1] USA Today, March 18,1997

5Who pays for Nursing Homes? Consumer Reports, September, 1995

6Business & Health Magazine, January, 1997

7 Consumer Price Index, Statistical abstracts of the United States, 1996

8 Business & Health Magazine, January, 19979 Division of Health and Long Term Care, NYS Department of Social Services.