chartered insurance institute of london

chartered insurance institute of london
Financial professionals realize that Medicare does not cover long-term care and that it's a bad idea to gift assets to qualify for Medicaid or Medical (in California). The Deficit Reduction Act of 2005 tightened loophole that allowed people to transfer assets to their children so they can qualify for Medicaid benefits.

Self-insurance for high net worth individuals must be treated. Long-Term Care specialists need to get the right information so that customers can be an educated decision about the long-term care insurance. It is important for calculating the actual costs of self-insurance, and forward it to the client.

It is dangerous to ignore the inflation factor in planning for the long-term care. Let's take a look at a couple in their mid-50s with 2 million U.S. dollars in cash and cash equivalents, including the non-principal. At first glance, the couple considers what their liability would be at today's rate. The average daily rate for a nursing home in California is $ 210/day. So, now the couple has some quick arithmetic and comes at an annual cost of $ 76,660 with a potential 5-year cost of $ 383,250.00.

They quickly discover that they can easily afford to insure themselves when they compare the 5-year cost of $ 383,250 to its $ 2 million liquid assets. The problem here is that the couple is not close to the actual costs of self-insurance. To do so, they would have to do the following:

• Set the current cost of care for the inflation

• Consider the possible tax consequences, which a qualified plan distribution or sale of assets, the value estimate as the cost of care out-of-pocket.

• account for lost opportunity to invest the money that was spent even the insurance during the last five years, they pay for care.

Now let us look at the actual cost of supply for the couple to live another 30 years. This would be the approximate time that one of them will need long-term care. Today's expense of $ 210 per day could grow to more than $ 900 per day 30 years from today. Multiplied out over a five-year care event, this would result in an out-of-pocket expense of $ 1.66 million, which is substantially more than the clients were anticipating.

In addition, if net worth individuals have a combined federal and marginal tax bracket of just over 37%, which could arise an additional tax of $ 610,000 if they are large enough to distributions from their qualified retirement to cover the cost of supplies. The cumulative distributions could be more than $ 2.27 million, to supply this event. If the long-term care event was just one of the spouses and the second wife lived on a further five years after the first death of a spouse, the second spouse has lost the use of the $ 2.27 million, expenditures for the care of the first spouse.

So, what is the cost to insure this risk? What is the cost of buying a long-term care insurance as a hedge against the risk that the long-term care insurance? If the couple is in good health, they can purchase a state long-term care insurance partnership policy with a $ 210 per day, a five-year benefit period and 5% with the inflation rate for a standard annual premium of about $ 2200 per year and per person. The couple would total $ 132,000 over 30 years to oppose the $ 2.27 million in maintenance costs.

To be honest and fair, you can also take account of the lost investment opportunity on the premium. Assuming an after-tax yield of 4%, it would represent an additional investment of $ 124,000, which is the true lifetime cost of acquiring long-term care insurance policy to $ 256,000 if the payment for 30 years.

To summarize, when most wealthy people the true costs of their decisions, they can see that the long-term care insurance is an extremely cost-effective hedging strategy. It is important for individuals to understand the financial implications of a long-term care event brings to their pensions. That is, if the real value of long term care insurance.

For more information, please contact with a Long-Term Care specialist who has been trained in Long-Term Care Financing and Planning. Visit http://www.LongTermCareInsurancePros.com and request a Free, No Obligation Consultation with Dane Petchul, LTCP, CLTC