New York Estate Planning & Elder Law Blog
Almost every post, we remind people that estate planning is a comprehensive undertaking that has many different options that can be tailored for individual needs. Experienced estate planning attorneys can help clients understand the role that different option can play in the estate planning process. Another vehicle that can provide individuals and their loved ones with financial security is long-term care insurance. With the growing cost of medical care and the average life expectancy of people reaching 65 today at approximately 85 years of age, high healthcare costs can become a severe drain on a family’s financial resources. However, planning for the cost of long-term medical care can help you maintain the bulk of your estate to distribute to your heirs as you see fit.
What Is Long-Term Care Insurance?
Long-term care insurance not only protects your heirs from the expenses associated with caring for elderly family members, but can also help you prepare for the costs of caring for your aging family members. The purpose of long-term care insurance is to help offset the costs of long-term care that can come with age. For instance, caring for an aging family member that has developed cognitive impairments such as Alzheimer’s disease can sometimes require a daytime visiting nurse while you and your family are at work and/or school, or even around-the-clock medical care in a nursing home facility.
All long-term care insurance policies are different, so it is important to pick the one that meets your needs the best. It is also important to understand the limitations that come with long-term care insurance. Typically, these policies won’t cover care at a retirement facility for a policyholder that is able to live independently. However, certain services that are required to assist a person with completing everyday activities, like transferring them to and from a wheelchair, are usually covered by these policies. Most policies typically work on a reimbursement basis, which means that you will still be responsible for covering a covered expense initially but are eligible for reimbursement for that expense.
Minimizing Costs
The cost of insurance can vary wildly from one person to the next depending on the circumstances of each individual. However, there are ways to minimize the costs associated with long-term care insurance premiums. One way of minimizing the costs associated with such insurance premiums is to make sure that you purchase a plan that is tax-qualified. Tax-qualified plans allow you to deduct a portion of the annual premiums on the policy in some circumstances, so you can personally recoup some of the policy’s annual cost. To qualify as tax-qualified, a plan must generally:
- Have a guarantee that it is renewable and cannot be canceled because of your health;
- Not condition your coverage on previous hospitalization or certain other preexisting medical conditions;
- Not exclude certain conditions that could develop as a policyholder ages;
- Meets certain other guidelines as established by the IRS.
Some business owners might consider purchasing long-term care insurance policies through their business because, in some circumstances, doing so allows a business to deduct all the money paid toward premiums on the policy. Ultimately, long-term care insurance can more than pay for itself even in situations where none or not all of the premiums are deductible. By reimbursing you for out-of-pocket costs, your estate can keep more of its assets to pass on to your heirs.