Addressing a Long-Term Care Concern

Planning for long-term care is an integral part of any estate plan. Historically, it was not seen as an important piece of the estate planning puzzle, and in many cases, it was viewed as a separate, unrelated issue. Often times in the past, it was left as an afterthought to be addressed at a future meeting. Today, most advisors agree upon its significance to the overall planning process. If left unanswered, it has the potential to undermine and destroy an estate plan. In fact, some estate planning attorneys consider it malpractice not to raise the issue of long-term care at some point in the estate planning process.

The planning process is different for every individual. Not everyone is in the same phase of the life cycle. Not everyone is motivated by the same concerns. People prioritize their needs differently. For instance, long-term care planning might be the first step in the planning for a prospect who has personally cared for elderly parents, while another individual may not address the issue of long-term care until much later in the planning process, after he or she has addressed some of the other needs caused by death, disability, or retirement.

To understand how long term care impacts the estate planning process, you need to understand what motivates people to plan their estate and how it can encourage them to protect themselves against the risk of needing long-term care. Below is a list of reasons why people plan their estates which may help you uncover the need for long-term care:

To Protect Children: Many parents plan their estates to name a guardian for their minor children. Others do so to plan for the continuing care of a disabled child. Parents who have previously addressed the issue of a pre-mature death and how it would impact their children, may now be motivated to plan for long-term care. Especially those who have disabled children. They usually acquire a first hand knowledge of its importance since they have personally provided this care. Long-term care insurance can provide the funds needed to support and protect younger family members.

To Pay Post-Mortem Expenses: Many people plan their estates to create the liquidity to pay the expenses associated with death. A prospect who is motivated to plan for burial costs, administrative fees and estate taxes may also want to plan for the long-term care expenses that might arise during life. Long-term care insurance can provide the prospect with the assurance that any costs of care would be paid.

To Transfer Property: Many people plan their estates to determine who gets their assets at their death. A prospect who is motivated to allocate her wealth may also be concerned with its preservation should she require long-term care. If she does not have sufficient income to pay the costs of her care, she will be forced to liquidate her assets.  Long-term care insurance can be used to preserve the value of the estate so that it can pass according to the estate plan.

To Preserve Assets: People with unique property or assets that are difficult to sell plan their estates so that they may pass their assets to the next or subsequent generations. They do so to avoid the necessity of a post-mortem forced liquidation. A prospect who is motivated to plan her estate for this reason may also want to plan for the need of long-term care. If there is not enough income to pay for these expenses, the property would have to be sold to generate the needed liquidity. Long-term care insurance can preserve the asset for the next or subsequent generations.

To Carry Out Charitable Intentions: Some people plan their estates to transfer assets to charitable beneficiaries. A prospect who intends to leave a significant portion or all of her estate to charity may want to protect the estate from the costs associated with long-term care. Long-term care insurance can provide the funds needed to preserve the estate for the prospect's specific charitable purposes.

This information must not be used for legal or tax advice. Visitors to this web site must consult with their own legal or tax advisor for specific tax advice. This information is excerpted from Northwestern Mutual's Advanced Planning Library web site.