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Interview with
Scott Zimmerman 
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What's all the fuss? How serious is the problem of Long term Care?
The problem is huge! As a society, the American people
traditionally do not revere our elders: rather, we have a history of discarding
them, which hasn't been a problem because life- spans have been shorter, which
meant people spent down their assets and died. With the increases in technology
and medicine, we will live longer than our finances allow.
This is
going to create an extreme economic problem for our country, as well as for
families and individuals alike. Most Americans do not achieve true financial
freedom as it is. Sure some people will be successful in accruing and
accumulating significant assets, but more likely most will be dependent upon
Social Security just to pay their basic living expenses.
The costs and
dollars for any form of extended care are simply un-calculable, open-ended, and
an absolute financial disaster.
So, you ask what is all the fuss?
Planning for Long Term Care is essential. It requires a proper combination of
financial and estate planning combined with open and honest family planning.
How does a client begin planning to guard against the costs of
Long Term Care?
The basic spirit in planning is to assure that
there is liquidity and a properly designed asset protection plan in effect. We
all want to preserve our assets, but the challenge is to create income streams
to assure there is money available to make choices about care. Mostly, we want
to eliminate the undue burdens that will be placed upon our families.
Most people obviously want to protect their health and protect their family
from financial disasters. Planning for long-term care is critical, because it
is a family disaster: dollars flow out, assets are liquidated, and estates are
quickly depleted.
Could your family sustain a $60,000 annual loss? If
so, for how long?
Can the costs really be that much? I have
assets, so do I need it?
I think this is an area where
self-insurance is ridiculous. After all, the exposures are unlimited. That's
when you buy insurance! This isn't a $1,000 problem; it's a potential total
elimination of your assets. What's the price to protect a lifestyle and
lifetime of accumulation?
My thinking is this: To preserve a $1,000,000
to $4,000,000 estate, we might be talking about less than 1% annually. For
estates larger than that, perhaps the expense is manageable. On the flipside,
if you have assets under $1,000,000, you'd be crazy not to guarantee you don't
have to sell your home to pay LTC expenses. So insuring becomes a logical
choice for most. That's Long Term Care Insurance!
But, the real reason
to plan for LTC expenses isn't totally financial. It's emotional - (Have you
ever been in a medical facility?) Ask someone who has been through this and
they will tell you that having cash flows from insurance to allow choices in
care is a godsend.
That reminds me - Doesn't MediCare pay for
LTC expenses?
No! That's the fallacy that many people who are in
denial about this issue want to rest upon. MediCare pays 90 days! (And the days
come with many strings attached!)
Many people falsely believe they can
shift or transfer assets to qualify for MediCal (California), but they are
absolutely mistaken. Those days are over! If you have assets greater than
$50,000.00, you had better do some planning.
Okay, so the need
is great, and MediCare is not an answer. Won't the government come up with a
plan for a problem this big?
I think it's too early to predict.
Clearly the dollars are not there. My impression is that the covered medical
costs alone, plus prescription drugs, create more challenges for Social
Security without the additional cost of LTC. So, my answer is, no; although
there is bound to be a lot of discussion on the subject.
So why
aren't more people doing LTC planning?
That's a great question.
There are lots of reasons. More people are aware of the need to do planning,
yet there continues to be a huge obstacle in approaching this issue. We really
have overcome this!
You see, people don't want to spend money for
something they don't want to think about and don't want to use. But
collectively, as a society, we have to plan. We need to help our clients
address the impact of a debilitating sickness or illness. Families have to talk
and prepare planning.
This is a societal problem, and each of us has a
responsibility here. Firstly, we must create an infrastructure that induces
people to enter jobs to care for and help this segment of our society. So that
people changing bedpans and helping people ambulate or toilet aren't paid the
same as people flipping burgers.
There is much confusion in the
media and press that is contradictory - you seem to indicate that LTC planning
is for almost everyone! Isn't it just for older people?
We all need
to begin planning for this now, for our parents, for our employees, and for our
selves. The need does become greater beginning at ages 50 and up, but this is
not a senior problem, it can happen to anyone.
Let's say 15 or 20 out
of 100 people will require some form of long-term care before they die. All 100
should get insurance coverage, because they are creating Financial Certainty.
Financial planning involves the creation of financial certainty. 100 out of 100
people have to address the LTC issue. Some may self insure and many will buy
coverage. You could be worth $50 million, but it has to be addressed because if
a family member requires care (and I don't care how wealthy you are), it
affects the family dynamics.
There's an emotional / psychological
component and a financial component. Both require a type of communication that
breeds frank and honest planning.
So, if you think I have strong
opinions about this issue, you are correct. The problem is huge, and the press
has been negligent on this issue.
Financial Certainty is
appealing and obviously insurance creates that. But at what
cost?
Surprisingly, not that expensive. In many cases the premiums
are tax deductible, both to individuals and business owners.
You can
go wild with plan design, but a properly designed plan should fit your budget.
I've written plans for as little as $400 a year, and as much as $80,000, so
there's quite a spread.
What should someone look for in a good
LTC insurance plan?
Billions of dollars in assets. (I am referring
to the carrier you buy from). Buy from a big, reputable company. This is a
fairly new risk for insurers and we have yet to see the real impact on claims.
Plan design requires making five decisions: how much, how long before
benefits begin, how long does it pay, does it address inflation, and does it
cover Home Health Care? There are a lot of complexities, but with good council,
the solution is really an easy one - a good broker does this for you.
Where do I begin?
Begin with a discussion with your
attorney; prepare current wills, trusts, Durable Power of Attorney; and make
sure your financial house is in order. Seek out a Long-Term Care specialist,
one who is an individual Broker rather than a "captive" agent. Run the numbers
and think with your heart. This is a take action issue!
Long
Term Care |
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