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Here's an interesting presentation on LTC costs from 2016. You'll probably need to inflate the numbers by 20% to get to current costs, but the distribution is unlikely to have changed.

https://www.treasury.gov/initiatives/fio/Documents/FACIFebru...

48% of retirees never need LTC
26% of retirees spend less than $100,000 out-of-pocket over their lifetime.
12% of retirees spend $100,000 to $250,000 out of pocket
15% of retirees spend more than $250,000 out of pocket over their lifetime.

Those are Massachusetts numbers, which is a high cost, high regulation state.

intercst
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48% of retirees never need LTC
26% of retirees spend less than $100,000 out-of-pocket over their lifetime.
12% of retirees spend $100,000 to $250,000 out of pocket
15% of retirees spend more than $250,000 out of pocket over their lifetime

--------------------------
Those numbers imply:
1. Over half of all retirees DO incur LTC care costs at some point.
2. Of those who spent $100K or $250K or more, those who had LTC insurance would have spent much more without it.

Bill
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I haven't read the linked report yet, but Bill's reply illustrates the possible problems with such a report.

Are the reported "out-of-pocket" costs truly oop after LTC insurance payments?
What were the total LTC payments?

Part of the difficulty in evaluating the utility of a LTC insurance policy is what is the true probabilistic expense for LTC vs. the cost to insure against that expense.

Ira
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And there are many who can't afford LTC and instead rely on family. I've seen that first hand.

Rich
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irasmilo asks,

I haven't read the linked report yet, but Bill's reply illustrates the possible problems with such a report.

Are the reported "out-of-pocket" costs truly oop after LTC insurance payments?
What were the total LTC payments?

</snip>


The numbers are nursing home spending whether you pay out-of-pocket, with an LTC policy, or Medicare/Medicaid picks up the cost.

Note that Medicare covers the first 100 days in a nursing home if you got there after a hospital stay. So many of these people with $100,000 or less in spending will see very little "out-of-pocket".

https://www.medicare.gov/coverage/skilled-nursing-facility-s...

intercst
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Of those who spent $100K or $250K or more, those who had LTC insurance would have spent much more without it.

Wouldn't that depend upon how much you've spent on your LTC insurance premiums over the years? I know several people who have already spent more than $100K over the past 25 years maintaining the insurance and still 'waiting' to use it.

Pete
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I know several people who have already spent more than $100K over the past 25 years maintaining the insurance and still 'waiting' to use it.
=========================================
Oh, we will, too, in the years to come. But that's no different than "waiting", and never using, your homeowners or auto insurance. It just seems that LTC is more of a discretionary choice, in that there's no lender, or the DOT, that makes you buy it.

Bill
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I know several people who have already spent more than $100K over the past 25 years maintaining the insurance and still 'waiting' to use it..

That’s not a lot different than what I have spent on house insurance over that amount of time.

Like most insurance, I pay premiums and hope to never need it. I don’t see LTC much different.
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I recently met with a financial advisor and I was surprised when he DIDN’T recommend an LTC policy. Maybe more because I’m single with no kids and am not concerned about leaving money to heirs.
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Like most insurance, I pay premiums and hope to never need it. I don’t see LTC much different.

</snip>


LTC is very different in that premiums could rise catastrophically and there's no way to control the cost other than cancelling the policy.

With homeowner's or auto insurance, you can always buy an automobile that's cheaper to insure, or move to an area where hurricanes or wild fires are less of a risk to your home.

There's a risk of incurring LTC expenses in retirement, and a risk you'll need to cancel the LTC policy if it becomes unaffordable.

And if you're wealthy enough that a rise in LTC premiums won't bother you, you're likely wealthy enough to self-insure and cut the insurance salesman out of the equation.

intercst
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I recently met with a financial advisor and I was surprised when he DIDN’T recommend an LTC policy. Maybe more because I’m single with no kids and am not concerned about leaving money to heirs.

It's that bolded part that is driving this. You don't have anyone for whom you need to protect your assets, so you can use everything you have for your care, and don't need LTC. If you run out of assets, Medicaid will take over.

It's a lot like when our FA advised that we should cancel our term life insurance because the kids were just graduating college, I was planning on retiring, and we had enough assets to carry us through. We didn't need to replace an income, so we didn't need to have life insurance.
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LTC is very different in that premiums could rise catastrophically and there's no way to control the cost other than cancelling the policy.

You mean like flood insurance that folks in areas that have been hard hit by hurricanes which rises to astronomical levels and there's no way to control those?

We've had LTC for about 10 years now, and our premiums are still the same. So yes, they could rise, but they haven't yet.

There's a risk of incurring LTC expenses in retirement, and a risk you'll need to cancel the LTC policy if it becomes unaffordable.

And if you're wealthy enough that a rise in LTC premiums won't bother you, you're likely wealthy enough to self-insure and cut the insurance salesman out of the equation.


Sure, there's always that risk, but I'd rather be paying the premiums and have some assistance from the LTC policy than have to pay it all out of pocket. That's a choice I have made, and I do understand the risks.

But the part you tend to ignore is that I am part of a couple, and so we have a concern about leaving an impoverished spouse, and for that, we prefer to have LTC. Now, when there is only one of us left, we may choose to cancel that LTC because then all the remaining assets could be used for that person's care, and we don't care if we leave the kids an inheritance. And yes, that means we will have paid those premiums and not collected, but as previously noted, I've paid homeowner's insurance for 35 years, and have preferred to have not needed to collect because the house has not burned down. And yes, I do know people whose house has burned down, some with loss of life. I prefer to have wasted those homeowner premiums.

In fact, I prefer to never need the LTC to kick in either, but again, that's my choice and may not match someone else's choice, particularly if our circumstances are different.
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2gifts ask,

<<LTC is very different in that premiums could rise catastrophically and there's no way to control the cost other than cancelling the policy.>>

You mean like flood insurance that folks in areas that have been hard hit by hurricanes which rises to astronomical levels and there's no way to control those?

</snip>


No. As I indicated in the post above, you can move to a different location to control your flood insurance costs. With LTC, you either pay the premium or cancel the policy. It's not like you can move to another state and get it cheaper.

intercst
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Maybe more because I’m single with no kids and am not concerned about leaving money to heirs.

That hurts, Aunt Edith. That hurts.

Does this mean I have to go out and get a job?

AW
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I have a LTC policy through Unum, which I started a year ago. It says if I cancel I will be able to use my accumulated premiums for LTC(read: not much). I will not lose that money.

What irks me is that my policy which I thought was for $3,000 a month anywhere is actually $3,000 in a facility and only $1,500 if I chose to use it for in home LTC. Nowhere did I read this when signing up for the plan.
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Maybe a bit off topic, but a way to manage LTC. I have opted to pass on LTC insurance in favor of doing a Medicaid annuity should the situation arise. Yes, you end up paying a few months of assisted living while everything works through the process, but, after that, your assets are protected and Medicaid pays the full amount.
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I have opted to pass on LTC insurance in favor of doing a Medicaid annuity should the situation arise. Yes, you end up paying a few months of assisted living while everything works through the process, but, after that, your assets are protected and Medicaid pays the full amount.

Do you have a spouse? That makes a tremendous difference here.

I've noted that the objections to LTC are coming from people who are not married and have no children, so there's no concern about spending all their assets on their own care. With a married couple, however, spending all the assets to care for one spouse leaves the other one destitute.

Medicaid allows someone to own a house, have a car, and have a small amount of other assets(used to be $2000 back in 2010-2012ish when we were dealing with FIL's Medicaid, but that would leave a spouse with next to nothing. Oh, and when the spouse on Medicaid dies, Medicaid has an automatic lien on the house and they get paid when the house is sold, even if that leaves the surviving spouse with nothing. That actually happened to my step-mother when her first husband died because he had been in a nursing home for so long - they got the proceeds from the house, and she was left with pretty much nothing.

So I stand by my opinion that LTC is something DH and I want because we don't want to leave one of us impoverished. As I said, that would change when there is only one of us left.

And, of course, just because my opinion differs from others' opinions on this board does not make either of our opinions wrong. It makes them different.
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windrath writes,

Maybe a bit off topic, but a way to manage LTC. I have opted to pass on LTC insurance in favor of doing a Medicaid annuity should the situation arise. Yes, you end up paying a few months of assisted living while everything works through the process, but, after that, your assets are protected and Medicaid pays the full amount.

</snip>


Absolutely!

Nursing homes in well-to-do neighborhoods are filled with people on Medicaid who transferred assets to their kids outside of the "5-Year-Lookback" window. That's likely a more cost effective solution than relying on the tender mercies of an insurance company.

https://www.forbes.com/sites/markeghrari/2014/08/01/the-medi...

intercst
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Maybe a bit off topic, but a way to manage LTC. I have opted to pass on LTC insurance in favor of doing a Medicaid annuity

I haven't heard the term before. Could you give a few words or a link to a glossary defining the bold facing? Thanks
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That hurts, Aunt Edith. That hurts.

Does this mean I have to go out and get a job?


I guess so. You never call, you never write, you cash all those checks do $5 on you birthday and Christmas but nary a thank you note....
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What irks me is that my policy which I thought was for $3,000 a month anywhere is actually $3,000 in a facility and only $1,500 if I chose to use it for in home LTC. Nowhere did I read this when signing up for the plan.


See.... this is why I really wonder if a LTC policy is worth it.

My mom’s currently in a nursing home. It’s $250 a day. So your $3k a month isn’t even half the cost NOW. What will it cost when you need it?

If you have to be in a nursing home, your LTC policy is just extending the time—slightly—that it takes to spend down your assets and end up on Medicaid anyway.

Sorry. Feeling cynical on this—my mom’s back in the hospital again, and am having to face paying out of pocket—again—to hold her room in the home.
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Medicare compliant annuities
https://www.kiplinger.com/article/retirement/T027-C000-S004-...

This is where a Medicaid-compliant annuity might rescue your retirement. You buy an immediate annuity—owned by and payable to you—that meets a number of special requirements, transforming cash that would otherwise prevent your ill spouse from qualifying for Medicaid into an income stream that helps you preserve your quality of life. Medicaid starts covering the nursing-home stay, and your monthly bills become manageable.

</snip>


intercst
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Do you have a spouse? That makes a tremendous difference here


I agree. This is something my friend is agonizing about right now. She married at age 50, and her husband is a good bit older and in poor health, with no money. It’s basically recently occurred to her that she’s got some big problems if he ends up in a nursing home in a few years. She has a daughter and wants to leave $$ to her. Also, she’s in a position to inherit money from her mother, and really doesn’t want to have to spend it on his nursing home. She’s trying to figure out how to get around all this.

She’s said so many times “we just should have keep dating.”
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Thanks. I didn't know Kiplinger was still around. Back in the early '80's when I was first spelunking the stock market thing Kiplinger's was one of the first magazines I started reading.
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Thanks. I didn't know Kiplinger was still around. Back in the early '80's when I was first spelunking the stock market thing Kiplinger's was one of the first magazines I started reading.

</snip>


I think Kiplinger's online-only today, no printed magazine.

intercst
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I guess so. You never call, you never write, you cash all those checks do $5 on you birthday and Christmas but nary a thank you note....

LOL.

Busted!

AW
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She’s trying to figure out how to get around all this.

She’s said so many times “we just should have keep dating.”


From a legal standpoint, marriage is a contract, with a readily available way to break the contract:

D-I-V-O-R-C-E

They can then just live together.

AJ
This is just one of the reasons I will likely never be married.
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What irks me is that my policy which I thought was for $3,000 a month anywhere is actually $3,000 in a facility and only $1,500 if I chose to use it for in home LTC. Nowhere did I read this when signing up for the plan.

See.... this is why I really wonder if a LTC policy is worth it.

My mom’s currently in a nursing home. It’s $250 a day. So your $3k a month isn’t even half the cost NOW. What will it cost when you need it?


My pension and SS are plenty to match your Mom's costs. And I have a handfull not being used in my 457b. Which I gotta start taking out RMDs on in 2021.
This thread is very useful to me. My surrogate parents in Port Angeles are going thru the LTC for both of them right now. They moved out of the home back into their beautiful house on the hill and are paying out of their deep pockets.

I am going to have to think about this. My Unum LTC is $120 a month.
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Nursing homes in well-to-do neighborhoods are filled with people on Medicaid who transferred assets to their kids outside of the "5-Year-Lookback" window. That's likely a more cost effective solution than relying on the tender mercies of an insurance company.

The risk with giving all your assets to your children, of course, is that they spend it or have a massive judgement against them in a lawsuit that uses these funds, or they simply decide the money/house is theirs, and put you out on the street. And we've all seen lots of discussions on how bad Medicaid-funded nursing homes are, so I'm not so sure that I'd prefer to be in one of those vs. a better level of nursing home or even in-home care.

And although it is perfectly legal to do this and have Medicaid foot the bill instead of using your own assets, that just means the bill gets handed over to the taxpayers while the heirs get to use the money. I have an ethical problem with that, but as I say, it is perfectly legal to do that.

I'd still like to know how this all works when there is a spouse involved, something that is still being conveniently ignored for the most part on this thread.

As I pointed out, my step-mother ended up virtually penniless because her husband had early-onset Alzheimer's and was in a nursing home for something like 15 years before he died. I'd prefer not to leave me or DH penniless should the other one need extended nursing home care. I don't mind not leaving an inheritance to the kids as we have given them their education which should carry them through, but I do not want DH or me to be penniless in our old age.
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D-I-V-O-R-C-E


I agree, and we’ve chatted about that. It’s occurred to her as well, but I don’t think she’ll do it.
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D-I-V-O-R-C-E


I agree, and we’ve chatted about that. It’s occurred to her as well, but I don’t think she’ll do it.


She should at least visit an attorney to see if there is something else she can do, such as keep her inheritance in a separate account so that it won't have to be used for his medical care. Not sure if that is possible, but an attorney would be able to guide her.
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I have read the source cited in the OP, and I have read this, and I have read the posts in this thread:

https://www.kiplinger.com/article/retirement/T036-C000-S004-...

Ispouse bought a LTC policy about 15 years ago through her job at the Commonwealth of Virginia. It appears to be worth keeping. It looks like I should continue to grow our assets so that we can pay for my LTC if needed rather than spend thousands on a policy that will have limitations in coverage anyway. However, if we had fewer assets, I would be looking at an affordable policy that provides some additional coverage as suggested by the Kiplinger article.

Thank you for raising the issue.
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intercst:"I think Kiplinger's online-only today, no printed magazine"

Wrong.....I think it's $6/yr if you wait for a special promotion. Otherwise about $10/yr. The latest issue showed up two days ago......


t.
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I've noted that the objections to LTC are coming from people who are not married and have no children, so there's no concern about spending all their assets on their own care. With a married couple, however, spending all the assets to care for one spouse leaves the other one destitute.

Married, two kids, and we won't do LTCI beyond self-insuring.

I have objections to LTCI on several levels, much of it based on our experience with my parents.

1. It's really hard to know what you are getting. I've looked at several policies and quickly get overwhelmed with the legal jargon and double speak. While I am no lawyer, I read lengthy contracts for real estate one phrase at a time and dissect that jargon slowly but surely. I have surprised real estate professionals by pointing out things in the contract they were not even aware of. I read these insurance contracts and cannot put my finger on just what is covered and reasons they won't cover things.

2. Even if you get an understandable contract, (real estate industry has worked hard to make their legal contracts more lay person friendly,) there is no way to know what the push back is going to be from the insurer. Fortunately for my parents, they had Sis fighting for them when their claims were routinely denied. She had worked in the health industry as a nurse for decades and understood the game. It was nearly a full time job fighting with the insurer. IMO this is SOP for insurers of all kinds. When Youngest had a bad accident DH spent many hours every week for almost a year fighting to get the insurer to pay up, and we had "good" insurance. They finally paid, but would we have this energy if we were dealing with a spouse in LTC? DH maybe, but I don't have it now. My personality is not one that deals with administrative things well. He's not allowed to die first if I have to deal with the insurance companies.

3. How do you know that the insurance company will still be solvent when you need it? Enough said on that one.

Those are the three majors. That said, we are not doing nothing. The one type of LTC insurance I leaned towards was more of an investment thing where you put so much into the policy and you got a policy that covered you right away. Their big push at our age was that you are not at risk for needing LTC only when old. If you decided to cancel at any time, or if you died without using, you got your original lump sum premium back. But I ran the numbers and for the $100K they wanted between the two of us it made more sense to self-insure. It is unlikely that we will both need LTC, (I for one would take things into my own hands if I were facing living in a nursing home,) and the growth of the $100K over the years was likely to be more than enough to cover one of us for a long time. This way if we didn't need to use the money for LTC we could leave it to the kids or some other charity. Sending foster kids to college is an idea that tempts me.

And speaking of the kids, they have already received their inheritance in the form of a fully paid college education. They may get more when we pass or they might not. They've been told not to expect it.

I realize it takes a certain amount of assets to feel comfortable with this approach, but I sleep better depending on ourselves rather than on an insurance industry that routinely denies coverage.

YMMV, and that's OK too.
IP
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She should at least visit an attorney to see if there is something else she can do, such as keep her inheritance in a separate account so that it won't have to be used for his medical care. Not sure if that is possible, but an attorney would be able to guide her.

And keep in mind all the moving parts - tax filing status ---> medicare income adjustment, etc.

But I'm not planning to ever marry again for all kinds of reasons.
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IP I do understand you, but on this one item, I think you may have missed the real deviousness.

3. How do you know that the insurance company will still be solvent when you need it? Enough said on that one.

As far as I know exactly zero life insurance companies have gone out of business in the last say 90 years. When ever a life insurance company gets in trouble, it is acquired by another. The industry will do what ever it takes so the public does not lose confidence in it. I mention life insurance companies, because they own most LTCI operations.

The deviousness is this - under the terms of the contract, LTCI folks can change your benefits and/or premiums at will - no need to consider leaving the business which might actually cost somebody their fat paychecks.
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Medicare compliant annuities

For those that consider this option (and don't get me wrong, it is a very good option when compared to spend down alternatives), you need to be aware that it is a non-qualified annuity and that any IRAs or other accounts in the applicant's name/ownership will need to be liquidated with taxes paid before the proceeds can be used to fund such.

I had a client about four years ago that did this and her spouse, as is often the case, had all of the retirement assets in his name - about $240,000 in an IRA. She had to liquidate his IRA and buy a 3-month compliant annuity. The tax implications of that were outrageous but it eventually saved her about $10,000 a month for the next 12 months or so while he lived out his remaining days in an Alzheimer's ward of a local nursing home.
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As far as I know exactly zero life insurance companies have gone out of business in the last say 90 years.

Let me enlighten you. It doesn't happen a lot, but it does happen that life and health insurance companies become insolvent and go out of business. This webpage includes a partial list https://www.nolhga.com/factsandfigures/main.cfm/location/ins...

Sometimes, but not always, policyholders are made whole through state and/or industry guarantee funds. Other times, policyholders do lose out on what they were promised.

Given that in the presentation that intrcst provided, claim rates were in excess of 100% of premiums and seemed to be trending up, rather than down, I suspect that more insurers who offered LTC insurance will be joining that list.

AJ
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"As far as I know exactly zero life insurance companies have gone out of business in the last say 90 years. "

AIG bailout:

https://www.thebalance.com/aig-bailout-cost-timeline-bonuses...
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I had a client about four years ago that did this and her spouse, as is often the case, had all of the retirement assets in his name - about $240,000 in an IRA. She had to liquidate his IRA and buy a 3-month compliant annuity. The tax implications of that were outrageous but it eventually saved her about $10,000 a month for the next 12 months or so while he lived out his remaining days in an Alzheimer's ward of a local nursing home.

I must be missing something.

She liquidated a $240,000 IRA to purchase an annuity that saved her $10,000 per month for 12 months ($120,000)...???
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quizzical100 asks,

She liquidated a $240,000 IRA to purchase an annuity that saved her $10,000 per month for 12 months ($120,000)...???

</snip>


It would have been $600,000+ if the husband lasted in the nursing home for 5 years.

intercst
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I must be missing something.

No, I think you get the point. The decision to purchase such (and to forgo other options) is not without potential risks.

If her husband had died 3 months in, then she would have saved nothing and would have likely lost money in the process due to the increased tax rate.

In her case, you might say that her "LTC policy" for her husband's lifetime of coverage (whatever the rest of his life may be) cost her the difference she paid in excess taxes.

It bit of irony here, if we can call it that, is that the federal government benefited from higher tax receipts while the state suffered from much higher medicaid outlays. The state does not have a progressive income tax.
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{{I think Kiplinger's online-only today, no printed magazine.}}


I get Kiplingers in printed form. I had a subscription to Money magazine so I would have a printed article to show my wife when I helped her with her retirement planning. Money stopped their printing and merged somehow with Kiplinger.
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No, I think you get the point. The decision to purchase such (and to forgo other options) is not without potential risks.

If her husband had died 3 months in, then she would have saved nothing and would have likely lost money in the process due to the increased tax rate.

In her case, you might say that her "LTC policy" for her husband's lifetime of coverage (whatever the rest of his life may be) cost her the difference she paid in excess taxes.


Thanks, now it makes sense. It appears that being married really complicates things. Fortunately I'm single and childless and plan to self insure (and take up some high-risk behaviors if I think I'm living too long).
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Hawkwin,

Thanks for relating the experience you had with Medicaid Annuities. My preference would be to create an irrevocable trust thereby removing our assets from Medicaid consideration. But, I am not ready to give up control. My worry is the 5 year "look back" period which is why the Medicaid Annuity is so handy.

We have $325K in our Traditional IRAs (split 60-40) with plans to whittle those down through Roth Conversions and Charitable Distributions when we turn 70.5 in 4 years. Admittedly, I will have a tough time liquidating these IRAs without incurring some taxes. I will try though. :)

All my planning is for my spouse. If I get there first, I plan to accelerate a risky lifestyle as well.
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If I get there first, I plan to accelerate a risky lifestyle as well.

What are you guys thinking about for risky behaviors, something physical or something more chemical in nature?

Pete
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She’s trying to figure out how to get around all this.
She’s said so many times “we just should have keep dating.”


From a legal standpoint, marriage is a contract, with a readily available way to break the contract:
D-I-V-O-R-C-E
They can then just live together.


Even if you're OK with the religious/moral/social aspects of divorcing for (possibly) improving your Long Term Care costs, there could be impact to your now-nonspousal Social Security benefits, medical/vision/dental insurance, life insurance, and especially inheritance of IRAs, 401ks, Roths and other property.
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A thousand recs for inparadise's 96344 post.
We had a LTC policy for me because of a family history of alzheimers.
I felt like we could self-insure, but my wife was far more risk-adverse than me.
Almost as soon as my wife passed away, I cancelled the policy.
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Even if you're OK with the religious/moral/social aspects of divorcing for (possibly) improving your Long Term Care costs, there could be impact to your now-nonspousal Social Security benefits, medical/vision/dental insurance, life insurance, and especially inheritance of IRAs, 401ks, Roths and other property.

Yes, every person needs to consider their views on the religious/moral/social issues. But as I said in my original post, from a legal standpoint, marriage is a contract, and, in the US, the Medicaid laws require that those in a marriage contract pay for each other's LTC even if the assets were one spouse's sole and separate property prior to the marriage contract. And let me remind you of these particular circumstances:

She married at age 50, and her husband is a good bit older and in poor health, with no money. It’s basically recently occurred to her that she’s got some big problems if he ends up in a nursing home in a few years. She has a daughter and wants to leave $$ to her. Also, she’s in a position to inherit money from her mother, and really doesn’t want to have to spend it on his nursing home. She’s trying to figure out how to get around all this.

It's not about (possibly) improving LTC costs, it's about protecting her assets/inheritance, and being able to leave that money to her daughter. He has no assets for her to inherit, so there wouldn't be any issues with her 'inheritance of IRAs, 401ks, Roths and other property' from him to worry about.

She could remain the beneficiary of any life insurance policies on his life - my parents were divorced and my mother collected from a life insurance policy on my father after he died.

If she remains married to him for at least 10 years, and doesn't remarry, she retains her ability to claim on his SS benefits. That said, I wonder if she really would benefit from claiming on his benefits - since he 'has no money' it could very well be that her benefit may be as much, if not more, than his benefit.

As far as medical/dental/vision benefits - that needs to be considered, but since she married at 50, she has, at most, 15 years to worry about those issues, until she would qualify for Medicare. Once she's on Medicare, her costs will be the same, whether or not she's married. That said, since the current average cost of a nursing home in the US is over $90k/year (even for a shared room) https://www.medicaidplanningassistance.org/nursing-home-cost... having to pay for just 2 years of his nursing home care out of her pocket would pay for all 15 years of medical/dental/vision costs at $1k/month. Since her concern is being required to deplete 'her' assets to pay for 'several years' of nursing home care for him, that would likely cost her a lot more than having to pay for her own medical/dental/vision benefits until she qualifies for Medicare, especially if she's been married for a few years.

AJ
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See.... this is why I really wonder if a LTC policy is worth it.

It depends on what you have. Our company offered a buy-in to a LTC program. It persists when we leave with NO PREMIUM INCREASE. Initial premium was set by our age, and 1poorlady and I got policies for about $30/month. I forget the maximum pay-out (and can't look it up until I get home). But it adds a substantial sum to our assets in the event of needing LTC.

As a single person you might be less likely to need it (since AlphaWolf is written out of the will). As married people I think it prudent. 1poormom is entering the senior community living. Not really happy about it. If she insists on moving (which she is) I will probably drop her into assisted living where the LTC policy then engages, and suddenly she has an added $163K (IIRC) to aid her living. Plus the premiums stop, so she has that added reduction in expenses (she pays about $160/mo). She'll hate that even more, but she has started accepting that she needs help (and we have outside providers coming in on an hourly basis for now in the IL wing of our building).

But, as I said, it depends what you have (or can get). Prudent or not, there may be some really bad deals out there. High monthly premiums, low payouts, etc. We got a good deal.
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She’s trying to figure out how to get around all this.

Divorce him, and shack-up with him.

Seriously. There aren't really any advantages to being married in that situation, and several potential negatives.

I've told this story elsewhere, but it's relevant:
We have neighbors (the hubby and kids still live there). We met them in their mid-30s. The wife had a massive stroke (very young). She was effectively brain dead, but her autonomic systems still worked (as I understand it). The husband had to make a choice -drain their assets caring for her, or put their two boys through college. He opted for the latter, and I'm sure his wife would have agreed. So he divorced her and she then became a ward of the state. This was maybe 10 years ago. The boys I think are now in high school, and should be going off to college soon.

She can be with him without being married to him. She should also set up a trust independent of him to protect her daughter, and ideally her mother should make that trust the beneficiary of her estate.
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But, as I said, it depends what you have (or can get). Prudent or not, there may be some really bad deals out there. High monthly premiums, low payouts, etc. We got a good deal.

Agreed. I feel I also got a good deal on mine. Additionally, comprehensive options aren't readily available these days. I got mine around 20 years ago. It compounds the daily payout every year (currently around 15k/mo) and has no limit on the number of years it will pay. It costs around $2,200/yr.

Bill
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Divorce him, and shack-up with him.

Seriously. There aren't really any advantages to being married in that situation, and several potential negatives.


Agree. DBF and I decided long ago we wouldn’t marry, for a variety of reasons, including financial.

Only downside is there’s no really good name for it. I feel stupid calling him my “boyfriend,” if we say “partner” people think we’re gay or just talking about a business partner, and “lover” is oookey. 😁
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Only downside is there’s no really good name for it. I feel stupid calling him my “boyfriend,” if we say “partner” people think we’re gay or just talking about a business partner, and “lover” is oookey.

I sometimes introduce Joel as my mother's sin-in-law. 😉

And there's always the expression brought to us by the Census Bureau in the 70s: POSSLQ

AJ
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Only downside is there’s no really good name for it.

There's always the old standby: "significant other".

My spouse hates when people introduce someone as "my wife" or "my husband". So when I need to make introductions, I just use her name.
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Agree. DBF and I decided long ago we wouldn’t marry, for a variety of reasons, including financial.

Only downside is there’s no really good name for it. I feel stupid calling him my “boyfriend,” if we say “partner” people think we’re gay or just talking about a business partner, and “lover” is oookey.

------------------------
That's for sure.

A nephew of my wife had a live-in girlfriend (for lack of a better term, as previously noted) who eventually became the mother of his youngest child. He was 51, she was in her 30's, let's say. He referred to her as "Donna, my caregiver."

I guess if it was me, I'd prefer to get married with a prenup. I figure I know how to be a husband, after all these years. I'm too old to go back to being a boyfriend.

Bill
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My spouse hates when people introduce someone as "my wife" or "my husband".

Ok, that's weird too.

Bill
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Even if you're OK with the religious/moral/social aspects of divorcing for (possibly) improving your Long Term Care costs, there could be impact to your now-nonspousal Social Security benefits, medical/vision/dental insurance, life insurance, and especially inheritance of IRAs, 401ks, Roths and other property.

Yes, every person needs to consider their views on the religious/moral/social issues. But as I said in my original post, from a legal standpoint, marriage is a contract, and, in the US, the Medicaid laws require that those in a marriage contract pay for each other's LTC even if the assets were one spouse's sole and separate property prior to the marriage contract...
It's not about (possibly) improving LTC costs, it's about protecting her assets/inheritance, and being able to leave that money to her daughter. He has no assets for her to inherit, so there wouldn't be any issues with her 'inheritance of IRAs, 401ks, Roths and other property' from him to worry about.


Sorry, I was talking about this idea in general, not your relative in particular. I know several people whose retirement benefits include company-paid health insurance (from ER to Medicare, AND after age 65 as a primary with Medicare as a secondary resulting in something better than free Medigap) which applies to the retiree and his spouse as of his retirement...but no adding of a new spouse later and no other dependents. Also, retirees from my company have pensions where 50% to 100% of the pension continues to be paid to the retirees spouse (but not "partner") after the retiree dies. There's also the ability to draw SS based on spousal benefit and not only one's own earnings.

I see that in the example you gave, there may be no upside to being married, but wanted to show that for many other people there could be downsides to dissolving the marriage for one particular financial possibility.
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It appears that being married really complicates things.

Actually, being married allowed for the other spouse to keep the family wealth largely intact. If they were divorced or he was simply single, he would have had no options to take advantage of a medicaid annuity.
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My preference would be to create an irrevocable trust thereby removing our assets from Medicaid consideration

That doesn't work when 90% of the family liquid assets is in retirement accounts; and who wants to incur those taxes in advance if you don't necessarily have to.
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Sometimes, but not always, policyholders are made whole through state and/or industry guarantee funds. Other times, policyholders do lose out on what they were promised.

It's kind of like the FDIC. If your policy is small you may be made whole. If it's large you may get part of what you've paid for, although you also may have the ability to continue paying a premium and receiving (some) benefits.

It varies by state.

Example:
https://www.policygenius.com/blog/what-happens-when-your-ins...

Link to state-by-state links:
https://www.nolhga.com/factsandfigures/main.cfm/location/gaC...
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Sorry, I was talking about this idea in general, not your relative in particular.

Not my relative, or my friend. It was a situation that was brought up as an example, and I gave advice that could get her out of the situation her marriage contract put her in. But when responding to advice given for a specific situation with a general idea, you should probably make note of that, so that people will know you are making a leap into another subject.

I know several people whose retirement benefits include company-paid health insurance (from ER to Medicare, AND after age 65 as a primary with Medicare as a secondary resulting in something better than free Medigap) which applies to the retiree and his spouse as of his retirement...but no adding of a new spouse later and no other dependents.

Which is why getting married actually should involve more analysis, especially later in life, or when at least one of the parties has assets. For instance, if the particular couple mentioned had done the analysis, they probably would have just continued to date, as the wife now laments that she wishes they had done.

Also, retirees from my company have pensions where 50% to 100% of the pension continues to be paid to the retirees spouse (but not "partner") after the retiree dies.

Generally, only if they are spouses at the time that the retiree made the pension choice that they did. So, getting married after one is already drawing on a pension won't grant the new spouse any pension benefits.

There's also the ability to draw SS based on spousal benefit and not only one's own earnings.

You forgot to mention the fact that if you were married to someone for 10 or more years, you can claim on the former spouse's benefit, UNLESS you re-marry. So if someone is claiming (or plans to claim) benefits on their spouse's record, they REALLY need to understand what the impact of getting married will be.

I see that in the example you gave, there may be no upside to being married, but wanted to show that for many other people there could be downsides to dissolving the marriage for one particular financial possibility.

Again, it was not my example - I was just responding to it. I would say for many couples in later life, there are fewer advantages to getting married than there are to not getting married. And it appears that many more couples are choosing the option to live together, rather than marry. In fact, my uncle, who had let me know that he didn't approve of my living with Joel, is now living with his girlfriend. I haven't asked him, but I suspect that it has to do with financial reasons.

AJ
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Actually, being married allowed for the other spouse to keep the family wealth largely intact. If they were divorced or he was simply single, he would have had no options to take advantage of a medicaid annuity.

Only if the spouse is knowledgeable and is willing and able to move all of the assets into a taxable account. It seems like there are a lot of married people who don't take advantage of these annuities, and the surviving spouse ends up with little/no wealth.

AJ
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Only if the spouse is knowledgeable ...

Yes, but my reply was in response to a comment that stated being single was less complicated (e.g. better).

Being single does not even allow for the Medicaid annuity option, regardless of the person's knowledge or willingness to move it.
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Yes, but my reply was in response to a comment that stated being single was less complicated (e.g. better).

Being single does not even allow for the Medicaid annuity option, regardless of the person's knowledge or willingness to move it.


Well, having seen Joel's Mom go through the process of getting a Medicaid compliant annuity, I would say that getting one is actually very complicated. So if 'less complicated' is equivalent to being 'better', then being single, and not even being able to take out a Medicaid compliant annuity seems like it is better.

And for those who are single and have chosen to self-insure rather than getting LTC insurance, then spending their money on their care seems consistent with their wishes.

AJ
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Thanks Hawkwin,

You have shown me the error of my ways - I was not aware that the irrevocable trust could not hold a retirement account. I guess, "fortunately", the retirement account represents only 15% of our portfolio.

I have always felt the government knew what they would get their "pound of flesh" when they created the IRA. Now, almost 40 years later, I believe it even more.

Windrath
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Hawkwin,

You wrote, Being single does not even allow for the Medicaid annuity option, regardless of the person's knowledge or willingness to move it.

Right. Because Medicaid annuities are only there to circumvent a problem that only exists if you are married. So not allowing for something you don't need is not a negative; it's a positive.

- Joel
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a problem that only exists if you are married.

???

That doesn't make any sense. Take the real world example I gave. If the man was single, he would have had to spend over $120,000 of his own IRA money (after taxes) on his own care.

By being married, his wife was able to take his take his IRA and buy a Medicaid annuity, thus keeping the family wealth largely intact.

The problem of medicaid spend down exist regardless. Being married offers a solution to avoid it.
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That doesn't make any sense. Take the real world example I gave. If the man was single, he would have had to spend over $120,000 of his own IRA money (after taxes) on his own care.

By being married, his wife was able to take his take his IRA and buy a Medicaid annuity, thus keeping the family wealth largely intact.

The problem of medicaid spend down exist regardless. Being married offers a solution to avoid it.



This just gets funnier to the point of ridiculous. Oh boy, let me run right out and get married to complicate my life, both financially and otherwise, to keep my wealth intact.

No thanks - I have enough to take care of pretty much everything even with spending like a drunken sailor.
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That doesn't make any sense. Take the real world example I gave. If the man was single, he would have had to spend over $120,000 of his own IRA money (after taxes) on his own care.

By being married, his wife was able to take his take his IRA and buy a Medicaid annuity, thus keeping the family wealth largely intact.


I think you're missing the point. If he were single, there wouldn't be any 'family wealth' to keep intact - it would have been 'his wealth'. And what better way to spend 'his wealth' than on his own care, rather than having all of us taxpayers pay for his care through Medicaid? I know what you're going to respond with - but what if he wanted to leave money to kids, or other beneficiaries? Yes, it's nice to leave money to beneficiaries, but as has often been said on this board, inheritances should not be counted on - nobody 'deserves' an inheritance.

In the case that you cite, $120k after tax from an IRA - the IRA had to be liquidated into a taxable account in order to buy the Medicaid compliant annuity. Assuming that there was also SS income of about $2650/month for the couple (average in 2019 for a couple is $2448 - so about $200 higher than average), the 85% of SS income that is taxable would use up the entire $27,000 standard deduction for a couple who are both over 65. That would mean that the entire IRA would be taxable income. To end up with $120k after just Federal taxes would mean that the IRA probably started out at about $145k, right? So there's about $25k that went to Federal taxes, rather than 'being preserved as family wealth' - and that's not even accounting for any state or local taxes that might have applied. For people with significantly larger tax deferred accounts (IRAs, 401(k)s, etc.) the tax bite would be even larger.

And for people who own other types of assets, there are other tax and selling cost impacts - ordinary income taxes on rental real estate, capital gains taxes on assets in taxable accounts, having to sell at a loss if the asset has lost value, etc.

Even with all that - there is no guarantee that the spouse who is the beneficiary of the Medicaid compliant trust will actually be able to 'preserve' the family wealth. Medicaid compliant trusts are set length trusts, with the length having to be less than the expected lifetime of the beneficiary spouse. If the beneficiary spouse dies before the trust is exhausted, the state generally has first dibs on the remaining trust money to repay the Medicaid spending. And even if the beneficiary spouse is able to live long enough to collect all of the money, there's nothing requiring that the beneficiary spouse actually 'preserve' the money - it's their money to spend however they want, or to be scammed out of, or to give away outside the family.

The problem of medicaid spend down exist regardless. Being married offers a solution to avoid it.

A complicated and potentially expensive way to avoid it. And since you were responding to someone who said It appears that being married really complicates things - it doesn't seem that the Medicaid compliant annuity does anything to alleviate the concern about being married adding complexity.

AJ
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let me run right out and get married to complicate my life

*chuckle*

My life has been enriched by being married, not complicated. I think numerous studies indicate that married people are happier, wealthier, healthier, and live longer.
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there wouldn't be any 'family wealth' to keep intact - it would have been 'his wealth'.

Family isn't just a spouse. In can be kids, siblings, even parents.

And what better way to spend 'his wealth' than on his own care, rather than having all of us taxpayers pay for his care through Medicaid?

If you want to have a moral argument against such, that is fine, but it isn't really germane to the topic. Gifting, to either a trust or family members to avoid spend down can be viewed just as morally problematic. All use the current laws to circumvent Medicaid spend down rules. Don't the player, hate the game.

Medicaid compliant trusts are set length trusts, with the length having to be less than the expected lifetime of the beneficiary spouse.

Correct, it was a 3-month annuity.

A complicated and potentially expensive way to avoid it.

No disagreement. But, for the family that has saved 90% of their money in a single retirement account when an acute health condition presents, there are few alternatives, if any.
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My life has been enriched by being married, not complicated. I think numerous studies indicate that married people are happier, wealthier, healthier, and live longer.

Widowed after 35 years.

https://www.psychologytoday.com/us/blog/living-single/201901...

Of course, your view is only one side of the marriage....
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Family isn't just a spouse. In can be kids, siblings, even parents.

Sorry, not when it's in an IRA. The "I" in IRA stands for "Individual" - which means it's 'his' wealth. A spouse, siblings, kids or parents may want to think of that money as belonging to 'the family', but, legally, it doesn't. Legally, it's 'his' money, even if he is married. In community property states, a spouse may have a claim on an IRA, and when divorcing, a claim by the non-owner spouse is often recognized even in non-community property states. When an IRA owner dies, there are beneficiaries, but until the owner dies, if the owner is single, it's the IRA owner's money, not 'family' money.

If you want to have a moral argument against such, that is fine, but it isn't really germane to the topic. Gifting, to either a trust or family members to avoid spend down can be viewed just as morally problematic. All use the current laws to circumvent Medicaid spend down rules. Don't the player, hate the game.

Not germane? I beg to differ. Why is it not germane to point out that Medicaid is paid for by all taxpayers when discussing Medicaid compliant trusts? The rules that allow people to have Medicaid pay for nursing home care do place a burden on taxpayers, in order to benefit people who are able to take advantage of those rules. I don't disagree with people actually taking advantage of those rules, but I think that it's disingenuous to talk about how to take advantage of the rules without pointing out who pays for the end result.

But, for the family that has saved 90% of their money in a single retirement account when an acute health condition presents, there are few alternatives, if any.

No disagreement. But you seem to paint Medicaid compliant trusts as a rosy no-cost solution, without acknowledging there are indeed other costs in choosing this path:
- taxes due to liquidating the IRA
- legal costs
- costs to taxpayers
- stress due to complexity of implementing such a trust

AJ
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*sigh*

But you seem to paint Medicaid compliant trusts as a rosy no-cost solution

You are being unnecessarily argumentative and your reading comprehension is lacking. You appear to have built this straw man of my position.

As I stated up thread:


The tax implications [of liquidating the IRA to fund the annuity] were outrageous ...

The decision to purchase such (and to forgo other options) is not without potential risks...


I neither suggested nor implied that it was rosy or no-cost. Please don't put your straw man on my position.


In fact, my very first post in this thread is to warn or caution those that are considering such.

Hawkwin
Moving on.
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My life has been enriched by being married, not complicated.

Those aren't mutually exclusive. I think life is a bit more complicated if for no other reason than I have to take another person's opinions/concerns into account for most decisions. That's not a "bad" thing, but it is a complication.

I wouldn't get married again, but I don't regret it for a moment. After almost 23 years I suspect we will be "till death". I think I got it right the first time. :-) (And I have her fooled so that she thinks she got it right too...she could have done much better than me!!)
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By the way, I'm gonna have to learn about "Medicaid compliant annuities". Never heard of them before this thread. I suspect I won't qualify since we upper(?) middle class folks never qualify for anything. I have a small IRA I started when I was in college, and a company 401K (that will have to be rolled into an IRA upon separation, or so I understand) that has been getting money for 26 years.

I eschew annuities because when I was learning about investing I read (somewhere) that insurance companies don't do investment products very well. You wouldn't go to your bank to get life insurance, and you shouldn't go to an insurance company to buy an investment. That made sense to me at the time, and I never really looked at it again.

1poorguy
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I eschew annuities because when I was learning about investing I read (somewhere) that insurance companies don't do investment products very well. You wouldn't go to your bank to get life insurance, and you shouldn't go to an insurance company to buy an investment. That made sense to me at the time, and I never really looked at it again.

1poorguy


I have mentioned before that we have an annuity from Lincoln's American Legacy, a variable annuity which invests in the stock market(s). The fund is advised by American Funds, a conservative Mutual Fund company. So, to me, this is not an insurance company which decides to try its hand at playing the stock market. It is a mutual fund company using an insurance company's cred to sell annuities.

CNC

Oh, yes. We are satisfied, Invested $40,000 Some years ago. Present value is $90,519. plus we have enjoyed an annual income of $5169 for the past few years, which income is guaranteed by Fidelity for life (and increases from year to year.) Surrender value is presently $90,500. We don't intend to surrender it.
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By the way, I'm gonna have to learn about "Medicaid compliant annuities". Never heard of them before this thread. I suspect I won't qualify since we upper(?) middle class folks never qualify for anything.

'Middle class folks' who have money save are the primary beneficiaries of these annuities, since less affluent people can probably qualify for Medicaid long term care fairly easily, and more affluent people are likely to self fund long term care.

The Federal government authorized the Medicaid compliant annuities and set up a framework, but since each state runs their own Medicaid program, the rules are state specific within that framework. So, you need to get the rules specific for your state. In general, all assets that the couple wants to protect from being used to pay for long term care need to be moved into the trust as cash, the entire amount placed in the annuity will be returned*, usually with a small amount of interest, the annuity must be a SPIA (single premium immediate annuity) with a fixed term that is no longer than the expected lifetime of the spouse who doesn't need the care and all of the money must go directly to that spouse.

The thing is - even if a Medicaid compliant annuity is able to save the 'family wealth' for one of the spouses, if that spouse also needs long term care, then then the expense that was incurred to set up the annuity was pretty much wasted, since the second spouse's care will need to be paid for by the assets that were 'saved'.

I have a small IRA I started when I was in college, and a company 401K (that will have to be rolled into an IRA upon separation, or so I understand) that has been getting money for 26 years.

If you are happy with your company plan's investment choices, fees and distribution rules, you can actually leave your money in the 401(k) as long as you have more than $5000 in the plan. That said, company plans can set their own distribution rules, and can charge (disclosed) fees to those who are no longer employees that they cover for employees. Company plans can also require that distributions be set amounts for a specific timeframe. So you really need to understand what your 401(k) plan rules are before you decide to leave the money in the plan.

I eschew annuities because when I was learning about investing I read (somewhere) that insurance companies don't do investment products very well. You wouldn't go to your bank to get life insurance, and you shouldn't go to an insurance company to buy an investment. That made sense to me at the time, and I never really looked at it again.

*Medicaid compliant annuities are the one type of annuity that doesn't hit the customer with significant fees. It isn't marketed as 'an investment'.

AJ
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In general, all assets that the couple wants to protect from being used to pay for long term care need to be moved into the trust as cash, the entire amount placed in the annuity will be returned...

We have a trust now. We would need to get cash into it (liquidating trust assets, or externally?), and then buy the annuity? The annuity would be in the name of the trust, so what difference would it make which spouse is taking it?

1poorguy
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We have a trust now. We would need to get cash into it (liquidating trust assets, or externally?), and then buy the annuity? The annuity would be in the name of the trust, so what difference would it make which spouse is taking it?

Sorry, your trust can't be the beneficiary of the annuity. The annuities aren't purchased until one of you actually needs long term care, and you want Medicaid to pay for that long term care. The beneficiary of the annuity will be the spouse who doesn't need long term care. All of the joint assets and assets (like IRAs) that are in the name of the individual in long term care that you want to be protected from having to pay for long term care will need to be liquidated, and the cash that is generated will be used to buy the annuity. You would need to check with an attorney to see if your current trust protects the assets from the Medicaid lookback, but it's unlikely that it does so.

There will likely also need to be a separate trust set up to receive any income (SS, pensions, other annuity payments, etc.) for the spouse in long term care. Most of that income will need to be sent to Medicaid to help pay for the long term care. A small amount of that income can be used for personal expenses for the spouse in long term care, but most of it will need to be sent to Medicaid.

As already stated - you can only protect your assets from paying for the long term care of one spouse. If the 2nd spouse also needs to go into long term care, they will need to use the assets that were 'saved' from having to pay for the first spouse's long term care, because those assets will all be in the 2nd spouse's name, and Medicaid will force them to spend the assets down before it will pay for the 2nd spouse's long term care.

AJ
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Late to the party, but:

If you have to be in a nursing home, your LTC policy is just extending the time—slightly—that it takes to spend down your assets and end up on Medicaid anyway.

It could be the opposite, that the LTC policy allows you to become eligible for Medicaid before spending down all your assets. Per https://www.aaltci.org/long-term-care-insurance/learning-cen...
(If link doesn't work, google "Partnership-qualified LTC")

Purchasing a Partnership-qualified (PQ) long term care insurance policy provides an added benefit. This benefit is described as “dollar-for-dollar” asset disregard or “spend down” protection. Individuals who purchase a PQ policy 'earn' one dollar of Medicaid asset disregard for every dollar of insurance coverage paid on their behalf.
Here's an example. Stephanie buys a PQ policy and needs care one day. Her policy pays out $150,000 of insurance claim benefits. Stephanie earns a Medicaid asset disregard that allows her to keep an additional $150,000 over the asset level she would otherwise have to meet in order to be eligible for Medicaid coverage. The Partnership Program also protects those assets after death from Medicaid estate recovery.
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