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Tax Tips: Long Term Care Insurance

Tax Tips: Long Term Care Insurance

You may be able to deduct all or part of the Long Term Care insurance premiums you pay for yourself, your spouse, or a dependent, but only if your policy meets the IRS criteria for a qualified policy. If you bought the policy before January 1, 1997, and it met the requirements of the state where it was issued, it is automatically considered a qualified policy. If you bought the policy later, it must satisfy several requirements to be considered qualified.

First of all, the policy must provide coverage only for qualified long term care services. These include necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, as well as maintenance or personal care services that are required by a chronically ill individual, in connection with a plan prescribed by a licensed health-care practitioner. Also, your policy must satisfy the following conditions:

• It must be guaranteed renewable, meaning that you can renew your policy as needed without undergoing additional medical exams
• It must not have a cash surrender value or any provision that allows you to cash in, pledge, assign, or borrow against the policy, or receive anything more than a refund of premiums paid if you cancel the policy
• It must provide that any refunds and dividends (other than refunds upon termination of the policy) can be used only to reduce future premiums or increase future benefits
• It must not pay for (or reimburse) expenses that are reimbursable under Medicare, unless Medicare is a secondary payer, or unless the policy pays a specified amount per day regardless of actual expenses
• It must meet certain consumer protection requirements set out in the Internal Revenue Code
If your Long Term Care policy meets the conditions listed above, or if it was issued before January 1st, 1997, at the least part of your premium may be tax deductible as a medical expense. To qualify for a medical expense deduction, your unreimbursed medical expenses (including Long Term Care premiums) must exceed 7.5% of your adjusted gross income. Also, you must itemize your deductions.

Note: Starting in 2013, the threshold to deduct medical expenses will be raised from 7.5% of adjusted gross income to 10% the threshold increase will be delayed until 2017 for those age 65 or older.

The maximum amount of Long Term Care insurance premiums that you can deduct in a year depends on your age at the end of the year. In 2012, deduction limits (which are indexed each year for inflation) are as follows:

Age Limit on Deduction
40 or younger $350
41 to 50 $660
51 to 60 $1,310
61 to 70 $3,500
71 or older $4,370

A qualified Long Term Care insurance contract is treated as an accident and health insurance contract, and the benefits are typically treated as tax free. However, if your contract pays a set dollar amount per day (per diem), the tax-free treatment is subject to a certain limit, indexed annually for inflation. Benefits over and above this limit are generally considered taxable income.

Under this limit, the amount of your Long Term Care insurance benefits that is excluded from taxation in a given period is figured by subtracting any reimbursement received (through insurance or otherwise) for the cost of qualified long-term care services during the period from the larger of the following amounts:

• The actual cost of qualified Long Term Care services during the period
• The dollar amount for the period ($310 per day for any period in 2012)

Abe Glickman, LTCA, LTCP
Member: AALTCI, NAHU, NAIFA, SOA
Abe Glickman Insurance Group
Toll-Free Phone: 877-298-5824
Email: AG@AbeGlickman.com

“It is better to create a plan 10 years too soon than one day too late.”

Questions or Comments? Give me a call!

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Long Term Care Is A Women’s Issue…Or Is It?

Long Term Care Is A Women’s Issue…Or Is It?

Lately, the notion that Long Term Care is a women’s issue has been generating a lot of buzz, but the truth is, our industry has been tugging at this thread for years. In my possession are studies, statistics, articles and agent presentations dating back to 2007 and I’m certain I could dig deeper.

Statistics

Statics are the scaffolding upon which out Long Term Care house was built. I could choose from literally hundreds, but let’s cite just a few so we speak a common tongue:

• A healthy 65-year-old woman has a 67% chance of living to 90 and a 38% chance of living to 95. In general, women live about five years longer than men, and have 10 times the chance of reaching 85.
• 80% of Nursing Home admissions are women
• The average age at admission for these women is 82.
• At that age, most of these women are single. Women older than 75 are much less likely to be married than men (38%-74%).
• Women are confined 50% longer than men.
• 65% of all claims are paid to women.
• Women are more likely to suffer from Alzheimer’s (which is the claims leader in frequency, length and dollars).
• Women provide 60% to 75% of all informal (unpaid) care, which leads to depression, illness and loss of lifetime earnings and future Social Security benefits.

It’s an extremely challenging portrait, is it not? One LIMRA article suggests that women lag behind men in retirement planning for any number of reasons, including choice of more flexible career roles and lack of financial literacy (sigh) – as if financially literate men are knocking down doors for Long Term Care insurance.

Gender-Based Rates

Never have innocuous powder-blue and bubblegum-pink data points had such dire consequences as when plotting “gender-distinct pricing.” But the trends had become too obvious to ignore. Besides, as one actuary put it, “We’ve always had gender-based rates: We just blended them here in the home office before the ratebook reached the field.”

In other words, men have been subsidizing women for a long time. The companies depended on receiving and issuing a certain ratio of male-to-female applicants, and all was right with the world. But what if this decade-long “LTC is a women’s issue” campaign really took off? What if one company received an extraordinarily high number of female applicants? They are costlier claimants who don’t pay the premiums they should. Without enough men to balance them out, it could topple the ship.

Enter gender-based rates: men pay what men cost, and women pay that women cost. No longer does it matter how many men or women apple (and are issued). Neither can upset the balance of the ship. For this reason, gender-distinct pricing is said to provide greater protection against the need for potential rate increase.

It’s A Family Issue

In the end, of course, I’m not an actuary. It’s easy for me to read pop-culture articles and throw pot shots from the gallery. However, statistics only take us so far. I’d like to go beyond the numbers, or “beyond dollars” to use the expression Genworth coins in their landmark report.

I’d like to re-visit and enrich the original premise: Is Long Term Care a women’s issue?” Respectfully, I would suggest it is much more.

First, our language should evolve from that of the 1970’s. Rather than varying between “compartmentalized” and “holistic” psychobabble, we could speak directly by choosing language appealing to “primary earners” versus “caregivers” (regardless of sex). The former is concerned with keeping his or her financial commitments into retirement, while the latter relies on the income of the former to provide for the day-to-day needs of the family.

In both cases, a sales is impossible if love for others is not present.

Just as importantly, if you’ve ever provided care, then you know that Mom’s extended care is not her “issue” alone. It cuts a swath through the family like a tornado cutting through a small town. It sweeps to Dad. It becomes Daughter’s issue and Son’s issue. Siblings who don’t actively participate in the caregiving or the funding still participates by stirring up resentment that lingers for years and helps to rip the family apart. Caregivers miss time with their own families – spouses and children of any age. (“Beyond Dollars” identifies them as secondary and tertiary caregivers).

So you see, our premise falls to live up to the hype. Long Term Care is not a women’s issue – it’s an everybody issue. Extended care impacts everyone. Not only has this been true in the past, but it will become more pronounced as longevity between the genders equalizes. Our messaging must reflect this reality or risk alienating significant markets.

Abe Glickman, LTCA, LTCP
Member: AALTCI, NAHU, NAIFA, SOA
Abe Glickman Insurance Group
Toll-Free Phone: 877-298-5824
Email: AG@AbeGlickman.com

“It is better to create a plan 10 years too soon than one day too late.”

Questions or Comments? Give me a call!

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5 Reasons You Should Consider Long Term Care Insurance For You And Your Family

5 Reasons You Should Consider Long-Term Care Insurance for You and Your Family

Professionals who study risk management say that individuals have several choices when dealing with risk. The choices include: 1) Avoiding Risk; 2) Retaining the Risk; or 3) Transferring the Risk

When it comes to the issue of Long-Term Care, people may avoid the risk because they don’t understand the potential for needing services. They may choose to retain the risk because they don’t understand the potentially high cost of care. Or they may transfer the risk as part of a carefully considered retirement and financial plan. Each person’s decision-making process is driven by different concerns and priorities. Here are reasons you should consider transferring the risk of a Long-Term Care experience through the purchase of Long-Term Care Insurance.

Economics
Protecting Your Assets
In the absence of other resources such as insurance, it may be necessary to pay for Long-Term Care expenses out of pocket. This could involve selling off assets, borrowing from an investment or retirement account, or even taking a loan against your life insurance. These options, although possible, are probably not what you had in mind when you purchased life insurance or began saving for your future. Long-Term Care Insurance may be an affordable way to help protect a much larger portion of your financial and retirement plan against an unexpected need for care.

Control
Having Your Own Way
A bottom-line issue in Long-Term Care is control. If you someday need Long-Term Care Services, you may find that you are not in a position to control how the funding of those costs is to be handled. Would you object if your family decided to liquidate some assets or sell something you value, such as a cherished collection, antiques, or vacation home? If you were to become incapacitated, you might not have a say in the matter.

By insuring part of the risk you increase the possibility that your assets will be handled and distributed according to your wishes.

Another important element of control is deciding where care will be provided. Long-Term Care Services may be provided in any number of setting including your home, an assisted care living facility, adult day care, or nursing facility. Being able to decide where you wish to receive care often tied to your financial resources at the time of need.

Risk Management Logic
Most people have homeowners and auto insurance, but if you scratched the paint on your car or a neighborhood kid threw a baseball through your window, you might pay those expenses without filing a claim because the cost is manageable. You have the insurance anyways, though, because you believe it’s just a good idea. If something major happened to your car or your home, you would be protected.

The need for Long-Term Care Services may have a much bigger effect on your finances than a scratched car or a broken window. Long-Term Care Insurance is a lot like your homeowner’s or auto coverage – you hope you never need to use it, but if you do, you will be glad the protection is there.

Quality of Care
The Privilege of Choosing Your Caregiver
Most people agree that the preferred place to receive quality care is the privacy and comfort of your home. However, depending on the type of care you receive, home car may be just as expensive as care received in a facility. By insuring for Long-Term Care Risk, you may be assured that care expenses will be less of a concern when receiving the best home care available. Having additional resources that care expenses will be less of a concern when receiving the best home care available. Having additional resource to pay for home care may also make the difference between staying at home and having to relocate to a care facility. Should institutional care better fit your needs, you may have funds on hand to pay for the facility you prefer, rather than one you afford.

Family Consideration
Stressful Decisions
An unexpected need for Long-Term care Services may create stress for family members confronted with issues of care giving. Caregiving may take a physical toll on family members who may have to help bathing, dressing, and other tasks associated with custodial care. It can also have a financial impact on family caregivers who have to miss time from work, change from full-time to part-time employment, or even leave their job completely. Finally, caregiving may have an emotional impact on family members having to take care of Mom and/or dad – Someone whom they have always seen as strong and in control. Physical and mental illness sometimes brings an unexpected role-reversal to the parent-child relationship.

An option worth considering…Long-Term Care Insurance helps with these considerations by providing benefits and resources to help you and your family understand the options and determine the best source of care. Long-Term Care Insurance provides options that you and your family may not know about or may not otherwise have the money to consider.

Abe Glickman, LTCA, LTCP
Member: AALTCI, NAHU, NAIFA, SOA
Abe Glickman Insurance Group
Toll-Free Phone: 877-298-5824
Email: AG@AbeGlickman.com

“It is better to create a plan 10 years too soon than one day too late.”

Questions or Comments? Give me a call!

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Breaking Down The Long Term Care Claim In Numbers

Breaking Down the Long Term Care Claim In Numbers

Now that Long Term Care Insurance has been around for a while, sufficient data has been accumulated so that we have a good grasp on claims. The industry is paying a very large amount of dollars in claims – some $6.6 billion in benefits was paid to about 200,000 individuals in 2011 – all of you should be aware of this information.

Here is an analysis of the more than 160,000 claims that a leading carrier paid by the end of 2011.

In Dollars
• $1.2 million is the largest single claim
• 50% of all claim dollars are paid to claimants with mental disorders including dementia

Benefit Recipients
• 78.7 is the average age of claimants. At age 80, it’s approximately 26% of claims, age 85 it’s about 24% of claims and age 90 it’s 9%
• Youngest claimant is 28; oldest is 103
• 71% of claims have been paid to female claimants
• Married women tend to claim at an earlier age than single women and men

Length of Claims
• 43% of claims last less than one years due to short recoverable illness, a sudden terminal illness or a single use of non-caregiving benefits
• The average length of claims that last more than a year is 4-9 years
• 35% of claims will last more than five years
• Of 100 people, 80 do not transition from where they receive their initial care.

Who Goes On Claim And For What – By Gender And Cause
• Single Women – 38% of all claims
• Married Women – 27% of all claims
• Single Men – 11% of all claims
• Married Men – 24% of all claims
• Women – Dementia, Cancer, Fractures, Stroke
• Men – Dementia, Cancer, Stroke, Parkinson’s

Of all the claims, 59% died while on claims, 30% recovered and 11% exhausted their benefits.

(Source – *AALTCI Source Book)

Abe Glickman, LTCA, LTCP
Member: AALTCI, NAHU, NAIFA, SOA
Abe Glickman Insurance Group
Toll-Free Phone: 877-298-5824
Email: AG@AbeGlickman.com

“It is better to create a plan 10 years too soon than one day too late.”

Questions or Comments? Give me a call!

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Will Adult Children Have To Pay Parent’s Nursing Home Cost?

Will Adult Children Have to Pay Parent’s Nursing Home Cost?

A recent court case out of the state of Pennsylvania has really gotten my attention which I wanted to bring to all of yours.

A Pennsylvania state appeals court has rules that the adult son of a nursing home resident is responsible for her unpaid $93,000 bill. Pennsylvania is one of 30 states to have filial responsibility statues. Florida is not listed as one of these 30 but some (including elder care lawyers) fear this is just the beginning of a trend.

About two-thirds of those 30 states, including Pennsylvania, allow long-term care providers to sue family members to recover unpaid costs. The reaming one-third have no recovery provision but failing to care for a parent is considered a criminal offense.

This case for the $93,000 bill involved a woman who spent six months in a nursing home facility recovering from an auto accident. She had monthly Social Security and pension income of only $1,000. This amount is far less than her cost of care, and while she applied for Medicaid, that process can take many months, and in this case, she left the facility while her Medicaid application was still pending.

As a result, the nursing home facility sued her son for her unpaid bill. He argued that she had some income so she was not indigent, but even if she was, other family members also had an obligation to help and all the burden should not have been placed on him.

However, the appeals court disagreed. They said in Pennsylvania someone does not have to be destitute to be indigent. Family members are responsible even if she has income, but has insufficient means to pay for her own care. The court also ruled that the facility could arbitrarily go after any family member is wanted, as longs as it could prove that relative had the resources to pay.

Although these filial responsibility laws have been around for many decades, they have rarely been enforced… but that may be changing. With the cost of long-term care continues rising (an average nursing home facility stay now exceeds $200 a day), senior service providers are finding themselves with more unpaid bills than in the past.

If you would like more information on this case, please visit the Elder Law Answers website which is which brought this to my attention.

Abe Glickman, LTCA, LTCP
Member: AALTCI, NAHU, NAIFA, SOA
Abe Glickman Insurance Group
Toll-Free Phone: 877-298-5824
Email: AG@AbeGlickman.com

“It is better to create a plan 10 years too soon than one day too late.”
Questions or Comments? Give me a call!

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Everyone Has A Long-Term Care Story

Everyone Has a Long Term Care Story

The era of Long Term Care is still new enough that people have stories that resonate deeply when told.

This is similar to life insurance in the first half of the 20th century. A typical story at that time may have been the father who died in his 30’s from pneumonia or an industrial accident, and left his six children and wife without any income. As insurance companies developed affordable products, families purchased them in droves. Fear motivated people to ensure that the fate of the family of six children did not befall them.

Today, life insurance is more often than not driven by a logical analysis of the numbers and statistics. It is still bought to protect the same need but the gut wrenching fear is rarely found.

Not so in Long Term Care situations. The parents and grandparents of today’s 40 and 60 year olds did not plan to live to age 90. They did not plan to develop Alzheimer’s or live through a stroke or heart attack. Nor did they know that their savings and Social Security would not provide the ability to care for their spouse or themselves.

Ronald Reagan was president of the most powerful country in the world, then he required constant care and supervision due to Alzheimer’s. Christopher Reeve was a successful actor with a young family, and then a quadriplegic who required 24 hour a day skilled care; still with his young family.

It’s not only famous people, of course. My healthy 72-year-old uncle who danced and flirted at my wedding in 2003 had a stroke in 2004. He is completely dependent upon my aunt for all his needs today.

They sold their house and moved to an assisted living apartment in order to preserve her health and financial stability. While his health had been severely compromised he has 10 grandchildren and he doesn’t want to miss a day of their growing up.

For those of you who think they are too young to buy the insurance, this story is for you. A president of a small company decided to put in a Long Term Care program for his key people including himself. He was only 54 but recognized the need due to his family history and liked the tax-advantaged benefit it provided. He decided in March but didn’t get around to the application until May. In April he suffered an episode of dizziness and was unable to speak for about 30 minutes. The doctors put him on a mild medication and told him they would watch it. Their diagnosis: Transient Ischemic Attack (TIS). Insurance results: Postpone for one year. A TIA is a precursor to a stroke.

Now that you have heard the emotional story, here are the logical reasons. Compare the cost of buying the insurance today versus waiting 10 years. If you deposit your premium amounts for 10 years, you will need to earn between 10 and 11 percent net after taxes to equal the savings generated by buying it younger. If you experience a stroke within the next year you won’t be able to buy it in 10 years. You will have already paid for your Long Term Care out of your own pocket.

Some of you may be thinking, “Well I have plenty of money to take care of myself.” I do acknowledge that this is the case for some people, and some do choose to self insurance. But here is my next question…how do you want to spend your money? Would you rather spend $3,000 per year for 20 years (total cost $60,000) or spend $200,000 per year 20 years from now? You would receive your premium investment back in just four months in a nursing home.

A friend of mine who is a Long Term Care specialist in California told me the story of her clients who were worth over six million dollars but wanted Long Term Care Insurance. When asked why they wanted the insurance, they replied, “When we are incapable of making our own decisions, we don’t want heirs deciding whether or not to spend their inheritance on our care.”

Another story I tell to my wealthier clients has nothing to do with Long Term Care Insurance but everything to do with our spending habits. My condominium had discreet water damage to our wallpaper and floors during a bad storm soon after I moved in. Not for a minute did we consider spending our hard earned money or time on repairs. My wife and I could live with it. Then, the condominium manager left me a message that I had a $7,000 settlement coming to me to replace the floor and wallpaper. All of a sudden I found the time to look for some new wallpaper. I tell prospective insured, if you have the insurance you will have the extra medical test done, you’ll have the floor replaced and you’ll hire that extra home health care that will make your quality of life the best it can be.

Abe Glickman, LTCA, LTCP
Member: AALTCI, NAHU, NAIFA, SOA
Abe Glickman Insurance Group
Toll-Free Phone: 877-298-5824
Email: AG@AbeGlickman.com

“It is better to create a plan 10 years too soon than one day too late.”

Questions or Comments? Give me a call!

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Top Honors for Abe Glickman LTC Agent

We are pleased to announce that Abe Glickman Insurance Group is the recipient of three awards from American Association for Long-Term Care Insurance. The Coral Springs professional was recognized by the national trade organization with the receipt of the following prestigious awards:

 

2010 Long-Term Care Sales Achievement Award for Individual Premium Sales*

Abe ranked 165 of the TOP 500 in the nation

2010 Long-Term Care Sales Achievement Award for

Individual Premium Sales by State*

Abe ranked 16th in the State of Florida

2010 Long-Term Care Sales Achievement Award for

Individual Sales of Policies Sold*

Abe ranked 71 in the TOP 500 in the nation

“There are over 40,000 insurance and financial professionals who market long-term care insurance,” says Jesse Slome, the Association’s executive director. “This annual award recognizes those leading professionals working to meet the needs of consumers nationwide.”*

The 2010 awards were presented to Abe Glickman in recognition of sales to individual consumers.

*American Association of Long-Term Care Sourcebook 2010

 

It is always gratifying to be recognized on a national level among one’s peers. I am very humbled by this achievement. However, I must explain how I reached this goal.

            It is not about how many appointments you have. It is not about how many kitchen tables you sit at making presentations. It is not about any of that at all.

            It is about service (I have written about this in past articles). It is about making sure that the promises I made, and the promises the insurance company made at the time of sale (purchase) are delivered and kept. It is not about just making the sale and disappearing. It is about staying, keeping in touch with my clients, and making sure they know I will be there when they need me! It’s about my clients having peace of mind. It is being your advocate at the time of need. In today’s world, it seems that everyone is out for themselves, not for you. Where I come from, a promise is a promise. My handshake is my bond.

By always valuing my clients, I have made service my number one priority. I have the best clients an insurance agent could ask for. My modest achievements are a direct result of referrals. I have been fortunate, but at the same time, my clients expect professional, expedient and courteous service.

I offer again to all of you who have Long-Term care policies, and have no connection with your agents to contact me so we can review your policy and allow me to be your advocate.

 

Abe Glickman, LTCA, LTCP

Member: AALTCI, NAHU, NAIFA, SOA

Abe Glickman Insurance Group

Toll-Free Phone: 877-298-5824

Email: AG@AbeGlickman.com

“It is better to create a plan 10 years too soon than one day too late.”

Questions or Comments? Give me a call!

Company Profile

Abe Glickman, LTCA, LTCP
Member: AALTCI, NAHU, NAIFA, SOA
Abe Glickman Insurance Group
Toll-Free Phone: 877-298-5824
Email: AG@AbeGlickman.com
“It is better to create a plan 10 years too soon than one day too late.”
Questions or Comments? Give me a call!

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