There are some issues in wealth management that transcend anything contemplated by either the planner or the client.How else to explain the professionals who earn in the mid to high six figures annually, and never get around to drafting their will? Or who somehow never find the time for their insurance physical…and who leave their spouse in peril of becoming impoverished overnight?To this list we need to add those who refuse to consider the possibility of arranging for quality long-term care.

At the root of all this bizarre behavior is an unwillingness to confront the basic issues of life, death, mortality, morbidity, disability, and the inability to perform daily activities of living without assistance.

This is where wealth and financial planners earn their keep. Hedging against uncertainty provides more potential return on invested premium than having a hot hand at running money.

The Need is Real

You already know the basics. Term life insurance is unbelievably affordable during your prime working years when your needs are the greatest, and you have years of future income to hedge. Christine’s post about drafting a will went into the basics of estate planning.

The beggar at the banquet is long term care insurance. We can all accept the inevitability of death, and make basic plans using wills and insurance to protect our surviving families. Many of us have short or long term disability insurance through our employers, and we all have it through Social Security.

But none of us wants to face the issue of human frailty. We work out frantically, willingly indulge cosmetic surgery, have our eyes lasered and our tummies tucked. But in the long run, we’re like the fleet of pre-embargo fifties cars cruising the streets of Havana, held together with duct tape and bailing wire and sheer ingenuity. Still destined for the scrap heap eventually.

There is some innate mechanism that prevents us from imagining our own infirmity. But the flip side of increased longevity is that rather than premature death, we face a stretched out old age….more time for more things to eventually go wrong.

Even the Energizer Bunny wears out it’s battery….given enough time.

Medicaid is Not the Answer

A wholly unsavory legal specialty has developed to help seniors “spend down” their assets in order to qualify for Medicaid assistance for nursing home care, thereby shifting their personal responsibility onto society as a whole. But the Feds and states are wise to this scam, and have lengthened the look-back period on transferred assets, and are even collecting on arrears in many cases.

You may be able to work around the new rules, but I can guarantee that you won’t be happy with the ultimate prize. Spend some time checking out Medicaid qualified nursing homes and see what all the best legal planning will provide for you when all is said and done.

Worse…your assets are now out of your control. There’s got to be a better way. There is.

Shopping Tips

The ideal window for long term care policies is in your early-to-mid fifties. Before chronic illnesses disqualify you, and yet with your retirement just over the horizon.

You can lighten the premium by lengthening the waiting period before benefits kick in, and by capping coverage to five years, which is a wide enough window to cover most nursing home stays. Be sure to opt for home-delivered assistance, and add an inflation rider to make the benefit meaningful decades into the future.

If you are have a net worth over $2 million, you may want to roll the dice and self insure. Plan on $75,000 to $90,000 in today’s dollars for enough in home care to spare your spouse the burden of being a full time caretaker.

We no longer have extended multi-generation families in the same locale, so you should not plan on having your adult children bear this burden.

This will be the best money you ever wasted if you never have to tap it for benefits.

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Posted: 05|27|08 at 6:26 am. Filed under: estate planning, insurance.
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