Ep 33 Navigating the Complexities of Long-Term Care Policies for Estate Protection

Unlock the mysteries of long-term care insurance and its pivotal role in estate planning as I, Todd Whatley, alongside expert Bill Mathews, traverse the intricate terrain of safeguarding one's future. We tackle the big questions: What's the likelihood of needing long-term care, and how do traditional and hybrid policies stack up? Bill brings years of expertise to the table, offering a deep dive into the evolution of the industry and the strategic move towards hybrid models. Prepare to have your eyes opened to the importance of discussing long-term care insurance with clients and how it can protect their hard-earned estates from potential risks.

Embark on a journey through the shifting sands of long-term care insurance with me as we confront the realities of rising premiums and the common hesitations that hold many back from securing their future. I'll share my personal experience with a traditional policy and consider the allure of switching to a hybrid approach. Our conversation doesn't stop there; I extend an invitation for a year-long collaboration to sharpen your elder law acumen. With comprehensive training and support from Elder Law Coach, I'll guide you towards becoming an influential voice in the elder law arena, ready to empower clients and navigate the complex world of Medicaid and estate planning. Don't miss the insights that can elevate your professional path and truly make a difference in the lives of those planning for the long term.

Check out our new website www.TheElderLawCoach.com.

Transcript

Speaker 1: 0:02

You're tuning in to the Elder Law Coach podcast, the definitive resource for attorneys delving into the world of Elder Law, with your host, todd Watley, a certified Elder Law attorney, past president of the National Elder Law Foundation and renowned coach with a quarter-century of specialized experience. Whether you're an established attorney looking to refine your expertise or an emerging lawyer seeking a successful foray into elder law, this is your masterclass. Now let's get started with the luminary in the field. Here's Todd Watley.

Speaker 2: 0:36

That's right. This is the Elder Law Coach and my name's Todd Watley, and I am always very thankful for those of you who download the podcast and listen, and I really love it when you share with folks and let people know about it. Today I have a guest and I want to talk about long-term care insurance. I know I did a podcast where I talked about my thoughts and feelings on it, but then Bill came up for an event at my office and I was like, hey, I'll just have someone who really knows what he's talking about on long-term care insurance. So Bill's a good friend of mine, he is a licensed agent and his focus is on long-term care insurance.

Speaker 2: 1:22

We're going to talk about two things. Number one what is it? I want him to explain from a producer's standpoint of what it is, and then, when is it important? And then I want to talk about why we should bring this up. We, as the attorney for clients, we need to bring this up to folks and let them know about it and make sure that they understand and I think there have actually been some lawsuits against attorneys for not bringing this up and not making the clients aware of it because it can save literally the entire estate. So welcome Bill. Thanks for being with me, hello.

Speaker 3: 2:02

My name is Bill Matthews and I'm really glad to be here sitting next to Todd and meeting his clients. I have sold long-term care insurance and helped clients with long-term care insurance for 15, 20 years and probably sold most companies that ever offered it and that has. The number of companies have drastically gone down from about 40, 20 years ago to about 10 or 11 now.

Speaker 2: 2:40

Yeah, it's very interesting. So, okay, let's start out first, just in case someone is not that familiar with long-term care insurance. And if you don't do elder law or deal with folks going through this, there's probably a good chance. And if you're 25, 30 years old, 40 years old, you may not even know what really what long-term care insurance is. So give us a basic breakdown of what long-term care insurance is.

Speaker 3: 3:05

Okay. Long-term care insurance is a way to provide a sum of money to pay in the event that you or a loved one ever needed care at home or in a facility and that care can be extremely expensive and you never know who's going to need it you or your spouse, or when they're going to need it, but there's a high risk that one of you will at some time should be an important aspect of estate planning.

Speaker 2: 3:47

When you say high risk, what is that risk? What is the percentage of people that, between a couple, one of them is going to need care?

Speaker 3: 3:58

The numbers that I'm seeing is like Todd said a husband or wife is about 70% probability that they will need care at home or in a facility before their time is up.

Speaker 2: 4:17

That's huge. I think people don't want to think about that number one. They don't want to think of the high possibility that they're going to spend some time in a nursing home. But it's there, it's true, and we have insurance for things that occur way less than that homeowners insurance. We did the research on that. You have a 10% chance of your home burning down during your lifetime, but we all have insurance for that, but we don't have insurance, or our clients don't have insurance, for something that's 70% likely going to happen, and that's why we're doing this show. So, bill, talk about there's you've covered, basically what it does. There are two types of policies. There's the traditional long-term care policy, and talk about how that didn't go over well, and then what they've. You know, typically there are still traditional long-term care policies, but the more popular policy is what's known as a hybrid policy. So talk about those two.

Speaker 3: 5:20

The traditional policy has been around since the late seventies or and it's on a health insurance basis. It's considered a type of health insurance and you pay premiums. Typically, most plans have paid for life. Some plans have a 10 pay where you pay it out in 10 years, and some even have a single pay where you deposit a large sum of money and you're covered for the rest of your life.

Speaker 3: 6:04

The problem with the traditional policies is that they had double digit rate increases for several years back in 08, 9, 10, 11 when interest rates went to zero and people were canceling their policies. People were getting. You know, it was just a bad time in the industry. Nobody anticipated nobody had anticipated zero percent returns, and so a lot of advisors and attorneys and people just pulled back from even talking about long term care insurance because of that scenario. So the industry responded with developing a new product called a hybrid, which is built on a life insurance chassis with a. It has a rider that pays for long term care. So you pay premiums and if you are deceased without needing long term care, your beneficiary gets the life insurance proceeds and likewise, if you need long term care, it would pay benefits for your care One. Either way, you're going to get your money back on that kind of policy, Very popular nowadays.

Speaker 2: 7:27

Yeah, yeah, those are great and it's just funny, always laugh because people are like, why does I just don't want to pay for insurance and never use it For some reason? That is the mindset with long term care insurance, but it's not the mindset with any other insurance. You're not mad that you don't get to use your homeowner's insurance when your house burns down. It's like thank God that didn't happen. But with long term care insurance, people are just, you know, they're just kind of cranky about it and I get it, and so the life hybrid model solves that problem. It's like I'm going to get my money back. I or my kids will get my money back, and so it is much more popular nowadays. And are you finding that it sells well? It to the right person? It?

Speaker 3: 8:16

overcomes two of the main objectives objections to long term care. Number one I'm not sure I'll ever use this no-transcript, and number two I'm not willing to accept future rate increases. That's true. So they did a good job putting these together. Okay, interesting.

Speaker 2: 8:39

So what is the ideal client for you? Who should definitely be looking at this, both age wise, health wise and asset wise.

Speaker 3: 8:50

Age wise. I have sold it to people in their late 30s looking way down the road and really people in their 50s who are already thinking about retirement and getting their affairs in order looking towards retirement. But if you're as much as 70 and you're still in good health, those plans are available also, and the premiums are based on your age, your health status and how much coverage you want to protect. Obviously, it would be very expensive to cover for any possible long term care event.

Speaker 3: 9:37

The whole idea is basically to co-insurance and pay for a portion of it or half of it. At least write checks from the insurance company before you dip into your own assets, right?

Speaker 2: 9:51

Okay, and asset wise, who would you recommend?

Speaker 3: 9:58

Asset wise, I would think that if you have very low assets, you probably would qualify for Medicaid at some point and secondly, you probably couldn't afford the premiums on the cash flow side. So you'd have to have four, five $600,000, including your home investment portfolio, things that you want to protect against the cost of long-term care so that you could pass it on to your beneficiaries.

Speaker 2: 10:42

Yeah, and one thing I've seen is, you know, I recommend people get either a three or five-year policy. They do sell lifetime policies but it's really not necessary and they're very expensive. You know, since most of you either do or should understand how Medicaid works. You know, with a five-year look back, if you have a five-year policy, we can work with the family soon as that person goes in, the family, comes to see us, we do transfers, start the five-year look back. So when the insurance stops, if they make it five years, number one, once the insurance stops, then sorry about that, then the penalty period's over with and they go on Medicaid. But honestly, most people don't make it five years. The I think we talked about this morning. The average is under three years. It's about three years, yeah.

Speaker 3: 11:38

A little longer for women than men. Yeah, so typically a three-year policy is pretty reasonable price-wise and it's going to cover not 75, 80% of the scenarios. Obviously, alzheimer's is the outlier and you can be on in a. My dad had Alzheimer's and was in a nursing home for seven, eight years.

Speaker 2: 12:05

Wow, I didn't know that Interesting, you know, and what I've seen with my clients who have Alzheimer's they're healthy, yeah, from the ears down they are healthy, but they need that care and they can live a really long time in a nursing home or needing home care, whatever. And, yeah, that is the outlier. But again, if you have a you know, even a three-year policy, we may have to pay for two years If we are transferring a lot of assets to get through that five years. But hey, two years is way cheaper than five. And if you get three years to pay for it, chances are that's going to cover everything and you know it's only going to cost us two years if the people will come see you early.

Speaker 2: 12:50

So you brought up something that I think is extremely important and I do want to talk about is the necessity that we talk about, that we bring this up in our meetings, that we as attorneys I think it's our obligation to talk about, and if you follow my recommendations on the importance of a power of attorney and why our power of attorney differs from the family law attorney or whatever, in that there's some language in there that allows us to plan for Medicaid and we you should be talking about Medicaid or long-term care, and then one thing that you should talk about is the importance of long-term care insurance, and so talk about how should a person bring this up or what are some of the issues. Having sold a bunch of policies, what are people thinking about long-term care insurance and what should they know about?

Speaker 3: 13:46

Well, one of the easiest way to move into a long-term care conversation with your clients is to, I think, assume that they've got long-term care insurance and say what type of long-term care insurance do you have? That's clever yeah. Yeah, not do you have it, but what type do you have?

Speaker 2: 14:11

Knowing that they probably don't have it Exactly and act, surprised that they don't have it.

Speaker 3: 14:18

That's smart, yeah. And then that opens the conversation. They're either going to say, well, I've got so-and-so and I don't like it, and so then you could offer to bring me in as a I could review their policy and make recommendations. One of the last four or five people that have called me about their policies was the premiums had gone up so much that they were going to have to cancel their policies. And I said what type of inflation coverage have you got on that policy? They said, well, I've got the best, I've got 5% compound. Call your company, delete your inflation coverage and your premiums will go down 20, 30%. And they did that and it was. It worked out great. They could keep their basic policy. They had plenty of benefits. So if they do have a policy, great, Get a copy of it and you can send it to me and I can look. Look at the copy and I'll send written recommendations that you could cover with them or I could cover with them either way, okay, are you licensed in all the states?

Speaker 3: 15:33

No, I'm only licensed in Arkansas, okay.

Speaker 2: 15:36

But if someone calls, we have coaching folks all over the country. If someone calls from a state you're not licensed in, could you I can get licensed in that state. It's pretty easy, right? Yeah, yeah, okay, or you probably know people Right, it's, it's no problem.

Speaker 3: 15:52

People do that all the time. Sure, okay, I've got friends that are licensed everywhere.

Speaker 2: 15:56

Yeah, Sure, I've heard a lot about that. That is a great comment to say okay, what type of long-term care insurance?

Speaker 1: 16:03

do you have?

Speaker 2: 16:04

Exactly, and they're like wait, I don't know, I don't have it. Should I? Yeah, probably, so, yeah, that's okay, very clever. So what are some of the biggest obstacles? You know what's the word I'm looking for? Objections. People have two long-term care insurance.

Speaker 3: 16:23

Well, the first is they're concerned that they may pay these premiums. They may pay premiums for years and years and pass away and not use the benefits.

Speaker 2: 16:33

Okay.

Speaker 3: 16:35

And the second one is the uncertainty with respect to future price increases. Those are two of the big obstacles and fortunately the new hybrid life policies eliminate those Right, and so it's a much more easy conversation to have with people and if they've got existing policies, you know they could take those premium dollars and if you're still healthy, you know it's based on their health, their age and how much coverage they get.

Speaker 2: 17:20

Yeah, and just so our listeners know I am looking into this. I have a traditional policy that I got back in my mid-40s I think, and it's gotten expensive it's over 500 bucks a month and it's one of those policies that I may not ever benefit from it. And so Bill's going to look at this for me and personally, look at this and see what kind of hybrid policy I can get so that I know I will get my money back. And I've just kind of eaten 10 or 12 years worth of premiums. But that's not the way you've been covered this whole time. I've been covered this entire time. If I needed nursing on care by Georgia, it was covered. But I think it is time to possibly change that and look at something else and just see what's like you know to produce a life insurance policy that will cover that All right. So, Bill, what are some final thoughts that you would have toward our coaching clients and how they can help their clients through this?

Speaker 3: 18:25

One thing I would suggest is, if you've been in business very long, you probably have a pretty good book of business and you might want to. I don't know if you're offering annual reviews, but just ask for those to see those old policies, whether it's a life insurance policy, wouldn't mess with term policies but any kind of permanent life insurance or any Long-term care policies. We'd love to take a look at those and hopefully give some solid advice.

Speaker 2: 19:03

Yeah, if you have an insurance person that you're confident that will give good, solid advice, will you know? Not try to, you know, just sell someone something new, but will truly look at it and give good advice? Sure, give them a call, but I think this is something that people will neglect all the time. And if you don't have someone, bill will be glad to look at those for you, and probably the best way to get in contact with him is to call my office, 479-601-4119, and we can get you in contact with Bill. Bill will be glad to look at a scan copy or paper copy, whatever.

Speaker 2: 19:42

Get that to him and he can make written recommendations and he also does a zoom call and so he can meet with you and your clients. Whatever just, however, works out best for you. But yeah, bill is here, he's agreed to be a resource for us to look at those things and either he can address it or he knows someone who can. So I just, I think this is hugely important and it's something that I've you know over the last few years, to be honest, when interest rates were zero, these policies were horrible. Okay, yeah, they just did not work and I just, you know, I just didn't feel comfortable with selling them. Now we're recording this in early 2024, interest rates have gone up substantially and the companies are now able to offer a much better project product. So I would highly recommend bringing this up to your clients, discuss it and, if you need, you know someone.

Speaker 2: 20:43

Bill is the guy to do that, and so if you do have questions, you can always email me Todd at the other law coach, calm that's Todd at the other law coach, calm or you can call the office 479 601 for 119, tell Fabiana that you're a coaching client or You've heard the coaching podcast and you want to talk to Todd about whatever.

Speaker 2: 21:05

I would love to talk to you and then also, if you need coaching, if you want to implement this into your practice and really become a proficient elder law attorney, I would love to work with you. Give me a year and I can make you a pretty good elder law attorney, with training and phone calls and just everything to help you Bring in clients immediately, start charging clients, doing the Medicaid, the estate planning. I would love to work with you. So, yeah, email me, todd at the order law coach, calm, or call the office and I would love to work with you. Thanks for listening, thanks for subscribing and tell folks about me. Okay, thanks, bill, for being here and hopefully We'll get some folks that will call us and can help. Thank you, todd, you're welcome.

Speaker 1: 21:52

Thank you for joining this episode of the Elder Law Coach podcast. For those eager to take their elder law practice to new heights and are interested in Todd's acclaimed coaching program, visit wwwtheelderlawcoachcom. With Todd Wattley by your side, the journey to becoming an elder law authority has never been more achievable. Until next time, keep learning, keep growing and stay passionate about elder law.