Insurance Needs Within A
Special Needs Practice:
Long-Term Care Insurance
___________
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The agenda…Part 1: The discussion that can no longer be put off
Part 2: Consequences motivate people, not risk
Part 3: How a plan can mitigate consequences and what will pay for that plan
Part 5: What long-term care insurance really does, it may surprise you
To give you compelling reasons why a plan for long-term care must be
integrated into every special needs plan
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A note… The targeted market for this discussion are those in their
50’s through late 60’s…
They are beginning to see their friends get sick or even die
Many are taking care of their parents
Retirement is in the near, not far, future which means the bank is closing
And they already realize that their financial commitments will continue well into retirement and past their death(s)
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Targeted demographic Clients who have a child with special needs, who
are also financially successful
Successful clients have upgraded lifestyles which include many financial commitments, in addition to providing for their child
They want to make sure that their family’s lifestyle continues should they Die during working years Become disabled during working years
Part 1
The discussion that
can no longer be put off
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Failure to talk about the consequences of requiring care over a period of years, risks the emotional and physical wellbeing of your client’s family
It also puts into play their retirement portfolio which is allocated for just that – retirement
Paying for care likely will force a reallocation of income and assets, severely compromising the financial viability of those who rely on it
Consequences to your
client’s family
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Providing care to chronically ill people makes healthy people chronically ill. It’s the nature of long-term care An inability to perform ADL’s A cognitive impairment so severe that the person is no
longer safe
The nature of providing care often tears families apart
Put simply, if your client ever needs care his life won’t end…
Someone else’s life will end
Consequences to their
retirement portfolio
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Retirement assets are divided into two portfolios: Income
Investments
The family lives on income generated from the income portfolio, not by liquidating investments
Generally lifestyle expenses equal income
Reallocating income to pay for care has two unintended consequences…
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1. It immediately impacts their lifestyle which always includes financial commitments, one of which is providing for a child who is disabled. This may include paying for a life insurance policy to fund a SNT
2. If the illness lasts long enough, it leads to an unintended invasion of the investment portfolio Causing unnecessary taxes
Jeopardizing the financial viability of a surviving spouse and a disabled child who must depend on an inheritance
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What if you…
Got a call from your best client’s daughter telling you…
“My dad had a stroke and we are worried that if he needs long-term care there may not be enough money. Our mom is beside herself”
What would you want to say to her…
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“That’s awful.”
Or…
“I’ll take care of everything”
Developing a plan to
mitigate consequences
and what will pay for that plan
Part 2
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The plan is straightforward…
For your client to Maintain their independence in the
community, without placing the emotional and physical wellbeing of his family in jeopardy
Preserve income stream so it can continue to support their lifestyle and keep financial promises
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What will pay for that plan…
Your client has two funds within his retirement portfolio…
Income funds
Investment funds
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As mentioned… Your client does not support his lifestyle by
spending down his investment fund, but rather by drawing down his income fund over a set period of years
That income comes from qualified assets, annuities, etc. and is supplemented by social security and possibly, a pension
Lifestyle includes keeping financial promises to his family
The portfolio is protected during
working years by life and other
forms of insurance…
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Asset & Income Asset & Income Portfolio Protection
Car
Home
Family & Kids
Wealth (estate issues)
Salary
Retirement Portfolio
Auto Insurance
Homeowners
Life & Health Insurance
More Life Insurance
DI Insurance
?
What has your client allocated
from their income to pay for
long-term care?
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When will the family panic?
A. When they start to divert the income stream to pay for care?
B. When they start to invade the investment assets?
C. When they get the diagnosis?
Answer: C
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They don’t know how long the illness will last…
And how much it will cost
Do you think the family believes that $2,000,000 is enough?
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“Peter, you understand that your retirement portfolio will generate income to support your lifestyle and keep promises to your family and community” I understand
“I can’t assure you that if you need care over a period of years, the income stream will be sufficient to support your lifestyle, which includes providing for your disabled child and pay for care at the same time”
Not discussing a plan for
long-term care and what will pay for it,
forces the client to rely on a federal or state
program or pay out of pocket
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Medicare is health insurance. It pays nothing for custodial care over a period of time
The VA is health insurance. If it was going to pay for custodial care, why do they recommend that military personnel purchase LTCi?
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Medicaid…
It pays almost exclusively for custodial care in a skilled nursing home, the one place your client doesn’t want to go to and is not likely to need
Medicaid is not free. Gifting qualified funds create an immediate tax. Low cost based assets create a future tax
Once on Medicaid, the spouse at home loses almost all of his or her monthly income
A different take on
long-term care insurance
Part 5
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Why do you think people buy theproduct? Choice of care and where it is given? No
Preserve assets? No
So they are not a burden to their family? No again
Pass money on to their children? No
They buy long-term care insurance
(LTCi) for the same reason they
purchase life insurance…
They love their family
“My client has enough to pay for his care”
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My client has…
$1,000,000. It’s really… $50,000 per year
$1,500,000. It’s really… 75,000 per year
$2,000,000. It’s really… $100,000 per year
That’s assuming every nickel is in the income portfolio
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Let’s look at where the money goes Helping a child who did not make the best decisions
Help pay for their grandchildren’s education
Supporting a summer home
Tithing
Membership in a golf club
Providing for their special needs child
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If their Income is $100,000…
What are their expenses?
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A note about expenses
Non-discretionary expenses = living expenses
Discretionary expenses = lifestyle
Query: Does your client differentiate between the two?
What does your client do when it comes to paying for long-term care?
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Since nothing has been allocated to pay for care, EVERYTHING has been allocated
Income from their portfolio will have to be reallocated
At a minimum, lifestyle is affected. If the illness continues, there is the likelihood of an unintended invasion of principal
In turn, this may compromise the financial viability of the surviving spouse and their disabled child
“Maybe. But if my client needs care over a period of years, he won’t have a
lifestyle. The money he saves can be used to pay for his care”
From the day he got married and
had children, it stopped
being his lifestyle
Here’s what I believe yourclient wants to hear…
Peter, I want to make sure that if you or Claire ever need care, the family will be able to continue to enjoy a lifestyle both
of you worked so hard for
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Peter, your retirement portfolio will generate income to support your lifestyle and keep promises to your family and community after you retire. Of course.
Here’s the problem… Should you need care over a period of years, the income stream may not be sufficient to support your lifestyle, provide for your child’s special needs, and pay for care at the same time. What do you mean?
What about the client who can“easily pay for both?”
Very wealthy people buy LTCi for
the same reason they purchase life
insurance…
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They assess consequences, not risk The more severe the consequences of an event are to
your client’s family, the less the risk of the event happening to him has to be
They understand, likely from a prior experience, that their needing care over a period of years could have severe consequences to the people they love. They also know that the cost of care will likely be substantial
Although they still believe that they will not need care, the consequences to their family make the purchase of LTCi a reasonable and necessary expense
In the final analysis…
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LTCi doesn’t protect individuals…
LTCi protects families
LTCi allows your client’s spouse to maintain her relationship with him as a spouse supervising care, not as a spouse providing care
LTCi allows your client’s children to maintain their relationship with him as children supervising care not as children providing care
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LTCi doesn’t protects assets…
LTCi protects income stream
LTCi allows the income portfolio to execute for the purpose it was intended; supporting lifestyle and keeping financial promises
By protecting income, LTCi protects the investment portfolio, thereby securing the financial viability of a surviving spouse and their special needs child