The Elder Law Coach

Ep 56 How Elder Law Attorneys Guide Smart Long-Term Care Decisions

• Todd Whatley

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We unpack long-term care insurance through an elder law lens, from traditional policies and hybrid designs to short-term coverage that pairs with Medicaid timing. Clear frameworks help you advise clients on affordability, underwriting, and when a trust outperforms a premium.

• Why a 70% care risk changes planning
• Traditional long-term care insurance pros and cons
• Hybrid annuity-life structures and payout design
• Short-term coverage to bridge Medicaid penalties
• Underwriting differences from life insurance
• Five-year coverage as a planning sweet spot
• When a MAPT beats ongoing premiums
• How to model with-versus-without policy scenarios
• Building a trusted advisor referral network
• Best ages to apply and common cutoff points

Visit our website, theelderlawcoach.com. Go, there are some links there so that you can schedule a time. Let's talk. I will call you, not a staff member. Please subscribe, please share. If you're on YouTube, leave a comment below.


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SPEAKER_01:

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_00:

Hey there. I am Todd Watley, certified older law attorney and the elder law coach. And as always, I am very thankful that you're here watching me today. And please like, subscribe, share this with others so that you can continue to get some, I hope, what you will find to be very interesting and relevant advice. And today we are talking about long-term care insurance. And this is one of those things that you'll probably deal with, particularly as an elder law attorney, you will deal with it on the back end. Hopefully, a client has it when they need long-term care. And that really opens up a lot of our planning to allow for more gifting, more covering the cost of care, so we can increase that percentage that we actually give away. But sometimes clients are going to come to you and ask for your opinion on a particular policy. Or many times, particularly if you're doing estate planning, primarily, I think it's your job as an estate planning attorney working with people that are getting older. I think it's your obligation to encourage people to look into long-term care insurance because it is one of those things that can really make a difference later on. And you need to encourage your clients to do that so that it will help protect even more assets later on. And it should be part of your long-term care policy, or not it should be part of your long-term care plan. Sorry, not policy, but plan. And an advisor, a financial advisor who has not brought this up to a client who is probably over 50, really, I would question their understanding of aging and how this works. And so there are going to be times when clients come to you and say, hey, what about this policy? What do you think about it? Or should I do it? So why this matters, the big picture is that over 70% of Americans are going to need some form of long-term care. 70%, okay? We buy auto insurance, we buy homeowners insurance, we buy an umbrella policy, we buy all kinds of insurance to cover possible claims. And I did some research fairly recently, and the chance of you having a car wreck that will need some form of insurance coverage within the next year is I think well under 10%, and I think probably close to like five or six percent. A five or six percent chance we're going to have a car wreck and we have insurance for it. I think it's even like below two percent, maybe under one percent chance that your house is going to be damaged and you will have to file a homeowner's insurance claim for one or two percent chance, but 70% chance of long-term care, and most people have absolutely no plan for it and also do not have insurance for it. And so it's it it's a huge blind spot for people that they just don't want to think about it. They're like, nope, don't care, don't want to think about it, but it truly is something that they need to think about, and I think it is your job as an elder law attorney to encourage people to look at that. All right. So let's talk about the three biggest types of long-term care insurance that you are likely to see. First is the traditional long-term care insurance. This came around in the 70s and 80s, and it is just like any other insurance, you basically rent it for a year. As long as your premiums are paid up and you need a service that it covers, it will then pay. It's just like homeowners insurance, car insurance, you can change, and you just pay and pay and pay and kind of hope that you don't need it. But long-term care insurance, when they first came out with it, they based their models on life insurance. And because they had no history of how people are going to use long-term care insurance, particularly to cover nursing home care. And so when they when insurance companies first started this, you know, they're really good at numbers. I mean, they have life insurance down to an absolute art. They can tell you out of this many policies, this percentage is going to need coverage. And they have it absolutely down. They've done it so much, and I'm sure they've share numbers that there are very, very specific numbers. When they came out with long-term care, they're like, Yeah, we'll just use the same numbers. It did not work out well. Insurance companies just plummeted because people um people drop other types of insurance like homeowners and different things. And so a insurance company can go for years with a client and never pay out, and maybe never have to pay out because the person drops the policy. That is not the case with long-term care. People hang on to that and they don't switch companies and they stay with this company. And the insurance companies loved it as they were selling it. It's like all this money's pouring in, but then these people got older, they never dropped their policy, and there's even a percentage of people that are going to drop a homeowner's car insurance, health insurance. They know those numbers again, and those numbers did not play out with long-term care. And so, therefore, we had these companies, smaller companies, who loved it when the money came in. But then when these people went on claim, and it's like, hey, send me the money that you promised me, they started struggling and they started paying out massive amounts of money that they weren't that did not fit within their schedule. And a lot of companies went out of business. You know, 10, 15 years after they sold these policies, they're like, we can't pay this. And it it was very interesting. And so they have gotten better at the numbers, and therefore long-term care insurance now is quite more expensive than it was when it first started. And particularly with COVID and different things, but they have started increasing rates, and you'll get people coming in who have a policy, but they're like, I don't know what to do with this. I can't afford this premium increase this year. Do I drop my coverage? Do I extend the period of time that the insurance company doesn't pay? What do I do with this? And they will sometimes come to you as an attorney to say, tell me what the deal is. And I think you may know nothing about insurance, but what I think you can do, and we'll discuss this more later, you can actually what I do with these people when they come in and say, Can I afford this policy? I will sit down and go through, okay, if you need a nursing home care tomorrow with this insurance, here's what it's going to look at look like. If you need a nursing home tomorrow without this insurance, here's what it's going to look like. And a lot of people that I see, and it's interesting, it's the poorer people who really don't need long-term care insurance because Medicaid's going to pay super quick, they buy policies and they struggle to make those payments. Whereas the rich people, they really don't need long-term care insurance because they have money to pay. It's those middle people that are like, man, I just don't know that I want to pay. I could pay two or three thousand dollars a year. I just don't want to. And they are the ones who, you know, don't purchase it. But a lot of people I see who come in with a policy, I'll look at it and say, look, you're gonna, as a married person, I can get you onto Medicaid month one, okay? Without this policy. With this policy, it's nice. It's it's gonna pay some, but since it doesn't pay the full cost of the nursing home, we still have to apply for Medicaid. And so with this policy or without this policy, we still need Medicaid and the rules are all basically the same. And so you'll see it'll kind of make sense to you once you look at it and say, yeah, with insurance, this is what's gonna happen. Without it, this is what's gonna happen. So the pros and cons of traditional long-term care insurance, the pros are lower premiums, okay? It's a monthly premium, just like term insurance. It's a low premium that people can afford, particularly starting off, okay. And particularly at younger ages, you lock in a rate that is much lower. Like I got my policy, I think, when I was in my C's, maybe early 50s, but I think in my 40s. My rate's not very high, but I've been paying on it for a long time now, and it kind of stinks. All right. It does provide very comprehensive coverage. It'll pay X number of dollars per day, and particularly if you get a in a um um interest option so that it goes or cost of living, it will go up every year, and it pretty much stays with the cost of care. So a lot of these policies are going to pay quite a bit of money. The cons are it is use it or lose it. If you don't need this insurance, you've just wasted money. You do that on other policies anyway, but people just aren't as upset or you know, cranky about it with homeowners or car insurance or health insurance, but they are really cranky about long-term care. It's like, well, I didn't need it. Well, thank God you didn't, you know, you did not need a nursing home. So that's that's good news, right? But it was there just in case. And so basically there's just no payout if it is not used, and premiums can increase, and those premium increases can become very substantial sometimes. All right. The next type of policy that we are seeing more of because insurance realized people aren't buying long-term care insurance, traditional long-term care insurance. And so what they are doing now is a hybrid between an annuity and life insurance, so that we combine those two things so that you can have money that is there to pay for care. But if you don't need care, there's a life insurance policy that will pay out to your heirs basically all of the money that you put into it and hopefully with some interest. Um the pros of these policies, and you can either pay monthly or you can pay one lump sum. And I think what a lot of people appreciate, particularly my middle asset clients, you know, they have you know 600 to two,$600,000 to um$2 million or so, basically just take a lump sum of money and put it into this policy and it's paid for, set it, forget it, it's done. And so you take two or three hundred thousand dollars and you can easily buy five, six, seven, eight hundred thousand dollars worth of long-term care benefits, and you don't have to worry about it anymore. It's like, okay, I've sacrificed this two hundred thousand to know my long-term care is going to be paid for, and at my death, my heirs will get three or four hundred thousand. And those are just purely examples. But the person knows they're going to get their money back one way or the other, and it gives them great peace of mind. And having a lump sum can be a con of owning this type of policy because sometimes it does have larger premiums, but typically you just pay for like 10 years. And so basically, what this is doing is say if you do a 10-year payment, you're paying on an annuity, you're purchasing an annuity up front with life insurance, and the money goes into the annuity, and then part of the annuity money buys life insurance. And so you've got both of these policies going up, and typically after 10 years, the annuity is paid off, it's done, and there's a lump sum of money there that you can draw from to pay for long-term care. But then also there's the life insurance with the death benefit. And then I think what appeals to a lot of people, and particularly if you understand how Medicaid works, a short-term policy kind of makes sense. They are much less expensive because they're not the insurance company is not paying out hundreds of thousands of dollars, they're paying out a set amount. But this is really nice. And particularly, these short-term policies are typically a year or less. And so you buy policy that'll pay out nine months, ten months, a year. And what that does, if you understand Medicaid, particularly with a single person who doesn't have a tremendous amount of assets, so this long-term care policy will basically pay during the penalty period if you give away assets. And with typical penalty divisors in most states being$10,000 to$12,000, well, a policy that pays out, you know, for a year can allow us to protect$100, you know, to$120,000 by giving us a 100% coverage of the one year worth of penalty. And so it allows those people with lesser assets to help the family, make sure things are covered and give them some peace of mind knowing you know my you know, fairly small nest egg is going to be given to my kids. The pros are it is less expensive, and the underwriting for those are much easier because they're not paying out as long. The cons are very short coverage windows, so it's it's not for someone with a lot of assets who we're trying to protect large sums of money and we really need a five-year look back covered. This doesn't cover that. And it may not meet extensive long-term care needs. Okay. All right, so what are some of the considerations for clients to consider when looking at these? Absolutely, long-term care insurance looks at health and age. And it's interesting, if someone's been denied life insurance coverage does not mean that they're automatically going to be denied long-term care coverage because they look at different things. A long-term care policy really doesn't care if you die. Okay, dying actually saves them money. So you having something that means you're probably just going to drop dead, you know, stroke, heart attack, things like that, if you're just going to drop dead, they're like, Yeah, we'll cover you because chances are we're not going to pay anything. Whereas life insurance really doesn't look at debilitating things, you know, arthritis, history of strokes, joint replacements, things like that, EMS, different things like that, that will cause you to not just drop dead but be disabled for a much longer time, they get to keep your premiums for a lot longer and eventually pay life insurance for that. And so you possibly could get a life insurance policy and not get long-term care, and vice versa. So just because someone has been denied life insurance does not mean that you cannot apply for long-term care insurance. All right. Affordability. These things are not cheap. Okay. The benefit is huge. And I would recommend, you know, I do recommend people have it. People think, since I do a ton of Medicaid, they're like, you you probably don't like long-term care policies. No, I love them. Because if we can not have to put someone on Medicaid, that's fantastic. Let an insurance company pay for their care rather than um the taxpayers. Sorry about that. Um, and so having I love long-term care insurance, and particularly if it's a short-term, my recommendation is a five-year policy. Okay. If someone comes to me and says, What would you recommend? I would say, look, get a five-year policy because within five years we can do gifting, we can do all kinds of stuff to protect the inst entire state. You don't need a policy that pays longer than that. And I I think I am correct to say they have companies no longer do lifetime long-term care policies. And so you can get them though that will pay seven, eight, ten years. There's no need to get a five-year policy. We do all of our planning at the very beginning of that five years, knowing that that five years is going to be covered and we're good. But they can be expensive, but they they also can provide a tremendous benefit. One thing that may surprise people is a long-term care policy is going to look at your family history. They will delve into what did your parents have, aunts, uncles, grandparents, things like that. And those things play into this. Again, they are looking for things that are going to cause you to be disabled, not just pass away. And many times people don't need long-term care insurance if they will qualify for Medicaid very quickly. All right. And so this is where I get a little crossways with insurance salesmen, salesmen sometimes, is because they will meet with a client who absolutely they can qualify as a married couple very quickly, and even as a single person, we can get them qualified very quickly, protect 50, 60, 70 percent of the assets, and get them onto Medicaid. And we really don't need long-term care insurance. So that's the basics of long-term care insurance. How should we advise clients? Number one, coordinate with a trusted insurance professional. Hopefully, you have someone in your network that you know you trust, they aren't going to sell someone a policy that they don't need, or that they are going to be very honest with people and truly look out for the client's best interest, find that person, and that's who I would refer folks to. I mean, it feels bad sometimes not sending them back to the person who sent them to you. But at this point, if that person has not talked about long-term care insurance or just long-term care in general, they need to find a new person. And if that person calls you mad, say, hey, you had not talked to them about long-term care. Let's coordinate, let's talk, let me educate you on this so that you can talk to your clients about long-term care. I mean, they make money from that, particularly if they are insurance licensed, and most of them are. They make money from selling long-term care policies. And if they haven't brought it up, they're just honestly, they're not doing a good job. And that is one case where I'll I'll, you know, and I can defend myself. Yes, I sent them to someone else because you did not bring up long-term care and they need it horribly. All right. Educate your clients about long-term care insurance, okay? Knowing Medicaid will help you be able to explain, even though you don't understand all the mechanics of the insurance policies and hybrid policies, annuities, life insurance. You don't you may not fully understand all that, but you can tell them, look, with Medicaid, without insurance, here's what's going to happen. With insurance, we can do so much more. That's the information they need to take with them to their financial advisor. Look at alternatives. Okay. Sometimes a Medicaid asset protection trust makes all the sense in the world, okay, with multiple properties, a home that the the family doesn't want to lose. Many times putting someone into a Medicaid asset protection trust is the best in insurance available and it's cheaper. Okay. You pay, you know, I I generally charge between$7,500 and uh ten thousand dollars for that trust, which seems like a chunk up front, but when you look at long-term care premiums, you'll spend that much in four to five years. And it seem it it then makes total sense. Okay. I would say the best time to get this is probably late 50s, early sixties. It's typically most people still have enough health that they can get this policy at that point, but they're not paying for 10 or 15 years when they don't need to, like me. Okay. I bought it back in my 40s because I was highly recommending long-term care insurance, and people were like, Do you have it? And I was like, No, I don't. So I got it. Now I've been paying for it for a long time, and I'll hopefully pay for it for a lot, a lot more time, but I don't recommend you do what I did. Look at it these early 60s. You almost can't buy it. Some policies cut off at 75, some at 80, but almost always by the time you're 75 ready, you have some diagnosis that is going to make this very difficult. Final thoughts. Long-term care insurance is is not a one size fits all. It's very unique to people, and people in their 50s, particularly 60s, need to have discussed this. And if their financial advisor has not, you need to. You need to bring this up to your clients. I bring it up in every meeting, every pre-planning meeting to say, have you taught about thought about long-term care? And it's a way to send more business back to the financial advisor, or sometimes it'll make them mad, but you need to make sure that your client is taken care of and that they are getting what they need. So look at their situation, work with a advisor that you trust and help people get this piece of their estate planning done correctly. And also, if you do Medicaid, it'll it'll make your job really cool when they need long-term care. All right. If you're an attorney and you want to have more in-depth coaching like this, if you want one-on-one phone calls, if you want all the videos that will teach you all about Medicaid, VA, estate planning, office management, everything, I would love to work with you. Visit our website, theodorlawcoach.com. Go, there's some links there so that you can schedule a time. Let's talk. Let's I will call you, not a staff member. I will call you. Let's talk about what you need and how I can help you do what is absolutely the best job in the world. Okay? Thanks for listening. Please subscribe, please share. And if you're on YouTube, then leave a comment below. Let's discuss this. Leave some comments, share this with your friends. Okay. Thank you very much, and I will see you next time.

SPEAKER_01:

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 www.theelderlawcoach.com. With Todd Watley 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.