Transcript Document

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
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To give you compelling reasons why a
plan for long-term care must be
integrated into every special needs plan
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
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Part 1
The discussion that
can no longer be put off
 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
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Consequences to your
client’s family
 Providing care to chronically ill people makes
healthy people chronically ill. It’s the nature of longterm 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…
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Someone else’s life will end
Consequences to their
retirement portfolio
 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”
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Part 2
Developing a plan to
mitigate consequences
and what will pay for that plan
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
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The portfolio is protected during
working years by life and other
forms of insurance…
Asset & Income
Portfolio
Car
Home
Family & Kids
Wealth (estate issues)
Salary
Retirement
Portfolio
Asset & Income
Protection

Auto Insurance
Homeowners
Life & Health Insurance
More Life Insurance
DI Insurance

?




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What has your client allocated
from their income to pay for
long-term care?
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”
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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
 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
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Part 5
A different take on
long-term care insurance
Why do you think people buy the
product?
 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
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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”
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
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“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 your
client 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
 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?
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What about the client who can
“easily pay for both?”
Very wealthy people buy LTCi for
the same reason they purchase life
insurance…
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
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In the final analysis…
 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
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