Long Term Care Insurance: Tax Advantages


For Individuals...

~ Qualified LTC insurance premiums can be treated and itemized as medical deductions provided they exceed 7.5% of adjusted gross income.

~ Qualified LTC plan benefits received are not taxable income.

For Employers...
~ Employer - paid LTC premiums are treated like regular health insurance and are tax deductible for S- and C-Corporations.

~ Employers receive a tax deduction for any portion of LTC premiums paid for employees.

~ Employer contributions and paid benefits are excluded from employees’ income.

~ There are group rates available; medical requirements may be waived for employee-group plans.


Long Term Care Insurance: You Get What You Pay For

Don and his father sat in the office drawing up a plan of care that would address Don’s mother’s increasing needs. It was an emotional meeting because Dad had always taken care of Mom in their fifty-two years together. It was very hard to consider entrusting her care to someone else.

In a world where spouses can literally die taking care of each other, one short term planning goal was to find reliable professional caregivers to keep her at home as long as possible. They also needed to outline a long term care plan for when Mom could no longer remain safely at home. Mom had Alzheimer’s Disease, a progressively debilitating, cognitive disease which eventually robs its victims of memory and renders them unable to care for their most basic needs.

Together we outlined a menagerie of short term services that included home modifications, private duty and licensed caregivers, day care services and respite care. She remained at home safely for several years at which point she moved to a special care residence for the memory impaired and eventually on to a preferred nursing home. While these changes and transitions were painful for her family, the costs of her care could have been equally painful.

Fortunately, Don was a financial planner who had the foresight to sell his parents Long Term Care (LTC) Insurance prior to his mother’s diagnosis. That policy eventually would pay for every service rendered, including the cost of home modifications and the actual care planning process. She continues to live at a nominal fee, in the nursing home, thanks to her son’s proactivity. This family was lucky. They worked with someone who had their best interests at heart. The professional son knew his product and he knew how to choreograph it to be of the greatest benefit to them.

Not everyone is so fortunate. Take the elderly couple who took out a LTC policy in their 80’s – to the tune of nearly $9000 per year. They had done some planning already by setting up a trust ten years before to protect their assets. They had $30,000 per year in income and $6000 in personal savings. With nursing home rates in Central New York at $200+ per day, where would they come up with the additional $120 to co-pay the daily cost of the nursing home when the need arose? Answer. They wouldn’t. They would, however, pay that $9000 combined premium every year until one of them needed care, at which point they will apply for and be eligible for Medicaid. They were throwing their money away on premiums.

Then there’s the woman who had complete care of her husband with Parkinson’s Disease. She and her husband had purchased a LTC policy ten years before and it was now time to file the claim. As the situation progressed, the issue of Medicaid was addressed. They had purchased two “Partnership” Policies, LTC insurance plans specially designed to “partner” with the State of New York to provide Medicaid benefits once the claim period is exhausted (The strength of such a policy lies in the guarantee of the protection of assets, regardless of the amount of the client’s net worth at the time of the Medicaid application). When asked about Medicaid planning, she indignantly replied “WE’RE not EVER going on Medicaid”. This woman had no idea why she had purchased such a policy which would not benefit her in the ways in which it was designed.

Countless people have also purchased policies that “aren’t worth the paper they’re written on”. Many people are scared off by high annual premiums and they compromise on features to lower those premiums. Some insurance salespeople “undersell” to make the product affordable. Recently a middle aged couple were considering a policy that would pay them $80 per day for two years with a very high deductible and a simple inflation factor figured into it. They were willing to pay out $200 per month for the policy without considering the following factors:

-The average stay in a nursing home is 2.5 years

-The current costs per day are pushing $300. 24 hour home care can cost even more.

-When they retire and are on a fixed income, will they be able to come up with the $120 per day co-payment when it comes time to file a claim?

-When they are retired or on a fixed income, will they be able to continue to keep up with the cost of the premiums?

Many people have paid into insurance plans for years and eventually cancelled them because they could no longer afford them. Don’t take a plan out to begin with, if you suspect it may one day be out of reach.

Everything is a gamble, especially in the insurance industry, which is ruled by statistics. The son of an elderly woman inquired as to the cost of LTC insurance for his mother. She was nearly 80 years old and the costs were staggering. A policy that would meet her needs was nearly $8000 per year. He and his mother chose to invest in it. That was last April. Earlier this year she suffered a few setbacks and in March moved into a residential care facility at a cost of $40,000 per year. One more year of premiums (her "deductible") and her insurance company will take care of her for the next five years. The gamble worked in this woman’s favor.

LTC insurance isn’t for everyone. Be sure when you meet with an agent that they are reputable and have a sound understanding of long term care. Many of the people who sell ineffective policies are not dishonorable people. They have often been trained in products and annuities and investments, but they may not know anything about long term care. Be sure they have a solid understanding about care and service features. Ask them if they know about Medicaid and rules of eligibility. Know what you are paying for and remember that if it seems too good to be true, it probably is.

You may find yourself with a representative from one company offering you quotes including various plan features. Just like anything else, different companies offer similar products at different prices. Comparison shop for quotes from a variety of companies. The savings could mean thousands of dollars in the long run. Be sure to also work with a solid company that will still be around when it’s time to file your claim.

LTC insurance is the only way to fund the costs of long term custodial care. The right LTC insurance plan can protect you from the catastrophic costs of nursing home and other types of care. Have an expert review your current policy to be sure it is designed to meet your needs. Make an informed decision before buying a policy; it may be one of the most important investments you ever make.


How To Create A Business Mentality in a Service Business

For the Professionals In the Midst!
Reprinted From GCM Magazine

[For those of us in business there was a point where we made the decision to stop working for someone else. Some of us moved up the ladder to become CEO's and Administrators; some of us went off on our own to become independent consultants and business owners. Whatever route we have taken, we find ourselves immersed in the lives of people who need our services and/or products.]

After 15 years in the long term health care system, I founded a private geriatric care management firm. Leaving the comfort and security of 9 to 5, I was off to explore horizons whose vastness I couldn't comprehend at the time.

Now, two years after filing my DBA, I am more aware, more assertive and more involved in the community than I ever thought possible. Designing and implementing my care management practice has been my greatest and most rewarding learning experience yet.

All of us are somewhere along this continuum of learning. If we are just beginning, we have the excitement and fear of wondering "What's ahead?". If we're established, we can look back and see that this career that we have embraced has helped us to grow in ways we never imagined.

Most of us possess a human service mentality. That mentality can get in the way of running a successful business. Developing a business mentality is just as important in the service professions as it is in any other endeavor. Set limits. Establish priorities. Say "no" once in awhile. You can't be everything to everyone. Develop and maintain a business mentality and you will be a more effective service professional. You can do this in the following ways:

1) Immerse yourself in programs, books and magazines that will feed that mentality. Read magazines such as Fortune, Success and Entrepreneur. Subscribe to FORTUNE Magazine and your local business journals. If you incorporate these motivational materials into your life, you will internalize them and they will become a natural part of who you are.

2) Surround yourself with successful, ethical, growth-oriented people. They will provide you with role models and increase your expectations of yourself as you create your future.

3) Find a mentor -- someone who will objectively give you feedback, guidance and constructive criticism. There are no qualifications for this person except to be honest and forthright with the desire to see you succeed. Sometimes a mentor who is in a totally unrelated profession can be most helpful and objective. Look for chemistry and mutual respect in this relationship.

4) Regularly Update Your Business Plan. Set realistic goals for yourself related to your business and how you will accomplish those goals. Focus not just on a mission statement but on how you plan to meet your budget based on your earnings and how you plan to market your services. Measure client satisfaction and offer continually improved customer service based on this feedback.

5) Be organized! Have a good filing system. Don't waste time looking for phone numbers or sorting through piles of paper to locate something specific. Pay someone their hourly rate if you need help getting out from under the paperwork. It's amazing how much more organized your whole life will seem when your office in order.

6) Throw out the answering machine and get yourself an answering service. This improves your professional image and makes it easy for potential clients to feel welcome. If you shop around, you should be able to find a service that is friendly and reliable.

7) Hire a good accountant and seek other professionals when needed. Don't scrimp on financial or legal help. These professionals are all part of a healthy plan for your business to succeed and grow. Remember to plan for your own financial future. Don't lose this priority by your tendency to take care of others first!

8) Make yourself VISIBLE! Good marketing is the #1 reason businesses succeed. Much of this is done by becoming "known"; your person, your company, your logo, your name. Do this by public speaking and networking. Get your name in print by writing articles, press releases, even letters to the editor. Remind everyone as often as you can that you exist!

9) Network like a fanatic! There is no better business builder than being active in the community. Continually expand your referral base and nurture your best referral sources.

10) Have the discipline to balance work, play and family. Take time for physical activity and spiritual fulfillment. Balance is the key to lifelong success. Take care of yourself at least as well as you take care of your clients.

Most of us are in our preferred business for the same reason. We want to make a difference by creating a product or service that helps others. If we become successful by doing so, that's wonderful. If we become financially independent by doing so, that's wonderful too!

Many people will want to try to tell us how to run our business. The day will come when each one of us will realize that our profession isn't about running a business. It's about having a mission. That is the day we will find security in the knowledge that if we keep our heart in the right place, we will be given the tools to succeed. This is called leverage and puts us in the most enviable position of all.

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