The latest bear market has taught investors the wisdom of a financial plan. Many accept the necessity of sticking to that plan but that acceptance does not always extend to Long Term Care as part of the plan.

Think of wealth building as four phases: accumulation, distribution, transfer and protection. We accumulate to meet our life goals. Distribution is drawing upon our accumulated assets. Transfer is passing our estate to our heirs. Protection belongs to all three phrases. We use life insurance to protect our dependents, health insurance for medical expenses, car and home insurance to protect these possessions and manage liability associated with their ownership. With our increased life expectancy, wouldn’t it be logical to provide for Long Term Care? So why don’t we?

Common objections to LTC planning:

• I’m too young.

If you equate LTC with nursing homes, this one is easy to believe. However, LTC has evolved a lot since the 1970’s. It includes long term convalescent care from accidents all age groups can incur. Plus, the younger you are when you take out LTC, the less likely you are to have a pre-existing condition that can make you ineligible. And the premiums are lower.

• I don’t want to go to a nursing home.

Of course not. The best LTC plans help you stay where you want to be longer. In general, it is actually cheaper for a provider to serve the person in his or her own home.

• If I don’t use it, I will have thrown away all those premiums.

Does a homeowner complain that the house hasn’t burnt down, so all those home insurance premiums were wasted? Besides, you can now get plans that allow you to put your spouse or parent on with you, as well as your children over 18. Benefits not used by one family member stay in the pool for the rest. Look at the charts that show you how quickly you recoup those premiums when you need the services. For example, on average it takes 25 days of LTC to recoup 2 years of premiums paid; 54 days to recoup 5 years of premiums.

• The government will take care of me.

Have you checked the “surplus” of the Federal Government lately? How about the budgets of Kansas and Missouri? With 75 million boomers “coming of age,” do the budget numbers allow this additional service? If you’re not yet convinced, think of the stories you see and hear in the press about threats to Medicare and Social Security. Spending down your assets so you can go on Medicaid means spending money on your own care until you’re poor enough to go on welfare. How is that a good plan? Especially if you wish to transfer some assets to your spouse and children.

• How do I find out the facts?

So many insurance companies go out of business. How do I know it’ll be around when I need services?
This is a case where “bigger really is better.” Check out the cash reserves of the company; how long it has provided these policies; how often it has raised premium. What is its A.M. Best rating? Your financial advisor can help. So can the Web page of your state insurance department.

Are there no alternatives to LTC insurance?
Sure there are.

• Have enough cash or income available for $2-3,000 a month at today’s rates. Factor in a yearly inflation rate of 5%.
• Fund annuities with MGIB’s-Minimum Guaranteed Income Benefits. Anything left from the annuity transfers to your heirs.
• Use trusts and asset transfer prior to the event.
Please note that giving away your assets within 3 years before need is subject to intense scrutiny by your State’s Medicaid Program. This practice is referred to as “the lookback.”
I hope this information leads to increased health for you, your loved ones, and your wealth!

Judith Zillner is Senior Investment Executive at Berthel Fisher and Company in Overland Park. She has 21 years of healthcare background as a Registered Nurse. You can reach her at 913.685.8880 or jzillner@palm.net.