Planning for Long Term Care Needs

[00:00:02] Speaker A: What essentially, I think we always want to set the table is making sure that when we think about future, what's going to happen in the future, there's two things that I think are really valuable. Number one, that you need access to cash, capital, liquidity, however you want to frame that. But as we age, we need access to cash, which is why very commonly people get more conservative as they age in their portfolios. Number two, simply by having a policy, it helps the family who is going to be your primary resource for care. It helps them manage that a little bit easier. There's a lot of challenges. Money is one of them. But not everything. [00:00:45] Speaker B: Welcome back to Lancapedia. I am Garrett Lail here with Lance Browning of Income Wealth Solutions in Tyler, Texas. Pleasure to see you as always. [00:00:55] Speaker C: Hey, Garrett, good to catch up again. Yeah. So joining us today is going to be my good friend, Peter Schimp, probably 20 plus year friend, 20 plus year business partner, one of the smartest guys I know. We are not not going to talk about college football on this podcast. Okay. But what we are going to talk about is long term care planning. This will be part two of a two part series. Last Time, episode six. We talked with Marcy Johnson, who is an elder care planning specialist regarding long term care planning. Today we're talking to my friend Peter about planning for long term care planning for that incapacity. The reason being we as advisors, you as clients, can do the most magnificent job ever in planning and strategically doing things for your retirement. And one long term care event will blow it all up. We don't want that to happen to you. So we just kind of want to educate you a little bit more on this process and some planning tools that we have at our disposal. Okay, so we'll get going. Peter, man, eye of the tiger. You got this. Take it away. [00:02:02] Speaker A: Thanks everybody. Thank you, Lance. And thank you, Garrett. I'm really excited to do this and for the opportunity to just kind of speak with everybody here. As Lance said, Lance is a dear friend. We've known each other for a long, long time and we've been partnered together in a couple different areas. But one thing that I always think is important to start with when we talk about long term care is how to have those conversations. Long care necessarily doesn't mean an insurance conversation. I think it really is more of a planning conversation with you and your loved ones, mainly your family. Right. And so if I can you take away nothing from this presentation today, hopefully you take away these things. Number one, have the conversation. And when you have the conversation I always like, want people to identify the things that they want to think through when they start having this conversation. Number one, if you needed care, and unfortunately a lot of us will, but if you needed care, where would you want to receive that care? Right? Meaning is it in Tyler, Texas? Is it in Dallas? Is it in Timbuktu? Right. Where would you want to receive that care? Number two, who's going to provide that care? Right. When I had this conversation with my parents, my parents said, you will never be my caregivers. I will do everything I can so that I'm not asking you to do the stuff that takes to take care of me, which could be potentially very intimate, they said, but we also don't want to go to a facility. So that was very helpful. They wanted to be in home and they wanted a vendor or some sort of professional service to take care of them. That's very important information. So we know, right? And the last question, and probably the most important because Lance is a financial advisor, is how do you plan to pay for that care? Right? So again, where do you want to receive the care? Number two, who's going to provide the care? And three, how do you plan to pay for that care? And the best time to have that conversation is as soon as possible, right? There is no perfect time to have that conversation, but it's very important to have that conversation with your loved ones. So everybody knows and obviously with your financial advisor. So everybody knows. Now, when we talk about paying for care, and that's really, I think the topic that we're going to discuss today is there's available options, right? Today we're going to talk a little bit about what long term care is, right? Then we're going to talk about what traditional long term care is and we're going to talk about something unique in a hybrid model. And we're going to go relatively quick because this is a very simple conversation, right? What long term care essentially is, it's when you need care, right? It's when you're not able to take care of yourself. And that can either manifest physically or it can manifest mentally. The average claims though that we see are actually more on the mental base. Our bodies are intact, but our mental is not there. The two most common reasons for claim are dementia, so cognitive impairment, essentially. And number two, stroke doesn't mean that encompasses every outcome, but those are things. And one thing that's very important with that is that it's very difficult to plan for when we're going to need that. And that's what I hear a lot from people. Wow. It came on very fast for my mom and dad or my spouse and we just weren't really prepared for it. That's why these conversations should happen very early. Because it's not very common that you have advance notice. These can be very sudden events. And so having those conversations early is very important. When we really talk about what is required to our caregivers, it's really these things and they're what's called the activities of daily living. And I like to always encompass this in saying this is the stuff that we do the first hour of every day without thinking about. So I think this is important to kind of think through exactly what long term care essentially is. It's that we need assistance completing some of these activities or potentially even all of them. Obviously there's a lot of options. And when we talk about those specific questions earlier, where would we want to receive her care? This is part of that conversation. Home health care is what most people would probably ask for. Right. If I had a stroke personally, just like my mom or dad, I want to stay in my home. But for some people, no, they may want to go to a facility or whatnot, that's completely fine. Right. This is a personal decision, but obviously worth that conversation to have. And then as we talked about, paying for care is really important. There's a lot of different options on the table. This is why Lance is such a successful financial advisor, is that he works through helping people understand how to pay for care. Right. But having advanced planning is very important. Making assumptions on what government programs are going to be there, what resources we're going to need is not really a plan. It's always important to have the strategy and have, have things earmarked because plans can change or strategies can change, or worse yet, government programs can change in the future. So we don't want to rely on information today if it's not accurate information going forward. Okay. When we deal with traditional insurance, and this is what most people think of, it's really more like a car insurance type model. So there's really only two outcomes here. You have an LTC event and then you get LTC payments. If you don't have an LTC event, there's no payments. So essentially it's like a car insurance model right now. For some people, this is a great strategy. For others, they don't really want to pay into something that's not going to work. So there's other options that they can do beyond just a traditional insurance model. Here and that's really where a hybrid solution might be very appropriate. So essentially we have three different ways that you can access this option. The first is, is that you have uniquely, you have a long term care event, you're going to get lots of leverage for long term care. So this is more of like an investment based model where you choose exactly what you want to invest. You work with a financial advisor said, this is how much money I want to commit to this challenge or this solution. And then if you need care, you get access to a tremendous amount of it and we end up paying benefits. But if you don't need care, and what really is unique with this is that every dime you invested in this is going to flow to your family. So if you need care, you have lots of access to benefits. And if you don't need care, there's zero risk this money flows back to your family. So definitely different than a traditional insurance model. [00:08:35] Speaker C: Yeah, Peter. Because just to kind of jump in a lot of times, particularly with the old traditional stuff that we've sold for years and years, which right now is really, really basically prohibitively expensive, it was use it or lose it. You make your premiums, make your premiums, make your premiums, you die without having a care event. Sorry about your luck. Money goes poof. This is going to be different in that there's going to be some benefit to somebody no matter what happens, Right? [00:09:06] Speaker A: Correct. And that's really important. In fact, when my parents bought their long term care policies a number of years ago, they basically said, hey son, you're going to get this money anyway. We might as well get it leveraged and multiplied to be able to use for our care if and ever we need it. So they looked at it as more of an investment strategy in understanding that whatever, if they don't need it, the money comes back to the kids, obviously my sister and I, but if they do need it, it's there for them and going to help us pay for whatever care that they need. There's another option as well too, and that's literally just canceling the contract and liquidating the account. And that's something that you can do as well too, because this is an investment. You can literally take the cash value and walk away as well too. So again, three ways to access it, lots of leverage, lots of value for long term care. That's a primary goal of this. You get your money back at least if you don't need it and just pass away with it. And last, if you have an emergency or you need to Access the cash value, you can cancel the contract and you can literally liquidate a large percentage of what you invested there. I'm going to share a real life example here. So everyone can kind of be understanding different numbers because these are all individual and there's different ways that people can pay for these things, which are very nice. So this is what the numbers would essentially look like and hopefully this is pretty helpful. So again, this is kind of an investment style. You get to choose how much you invest in this and you choose that at the beginning. So for this specific client, which is a 65 year old married female, she's putting in 10 payments of $13,776 a year. There's no opportunity for her to increase the payments or for us to ask for more money. She knows exactly what she's going to put into this. You don't have to pay over 10 years. This client's choosing to be over 10 years. There's other payment options as well too, and we can go through those options in a minute. But essentially you, you know exactly what you're going to commit to this solution day one. So that's very important. Number two, we talked about the benefits and this is where I think the value is going to be that's going to be located in this column. So even though in this example at 65 she's only made one payment, she actually has access to $374,000 of long term care coverage immediately. And this, if she did need care, and this needs to be qualified by her doctor. But if she did need care, she would be able to start taking payments of $4,882 every single month. So really important here, and we'll go through claims here in a second in the process because I think that is very important. But the basic functionality is that immediately you get access to a large percentage of dollars guaranteed tax free for long term care. [00:11:51] Speaker C: Peter, real quick. Hey, real quick. I did read that last part. The what is tax what? [00:11:57] Speaker A: Tax free. [00:11:58] Speaker C: Thank you. Okay, very good. I'll make sure I heard that right. [00:12:01] Speaker A: Very important. Yeah, taxes are important. As we look at investment management and benefit management down the road because we do not want to be pay taxes on this because there's a lot of money that can potentially be be sent out here. Number two, if we do pass away, this is a tax free death benefit that would pay to our beneficiaries. Remember, one of the neat components with this is that there's always going to be something that's there for the children if we don't need it, or the state, excuse me, if we don't need it, this money's flowing back. So even though this client's only made one payment, if she tragically just passed away without needing care, we would send a check for $118,000. Now, eventually down the road, if she needs care at age 80, for example, she would have access to a little bit more, but her death benefit would be $137,000. And again, this would be tax free as well, too. But if she wants to cancel it and changes her mind, hey, I need the money, whether it's an emergency or whatever, I just want to cancel it and walk away. The vast majority, not everything, but the vast majority of what she has, she can walk away with. It's at least going to be 75% of what this client would invest at that point. So if they make one payment of 13,007, 76, and they said, you know what, I don't want this anymore, I want to cancel it, they can walk away with $10,332, which is exactly 75%. [00:13:19] Speaker C: I think the thought process we're trying to get across to you is, look, I can take a certain portion of my total assets, put them in a vehicle, this vehicle, or a similar type strategy, those funds are going to take, for lack of a better term, take one for the team, so to speak. Okay. And those funds are going to cover maybe all, maybe at least a significant portion of that long term care need, allowing my other funds, my other monies and other accounts to basically remain relatively well intact for later on, should you need it, should you want it, or as you said, Peter, legacy purposes to my beneficiaries later on. [00:14:04] Speaker A: Correct. And I think the framing that I've used a lot with clients and Lance, I know you've heard this line from me, this is that what essentially I think we always want to set the table is making sure that when we think about future, what's going to happen in the future? There's two things that I think are really valuable. Number one, that you need access to cash, capital liquidity, however you want to frame that. But as we age, we need access to cash, which is why very commonly people get more conservative as they age in their portfolios. They're not invested as aggressively at 80 normally as they are at 60. Right. And the main reason for that is that they might need access to care or health care, which is expensive. So they're creating that cash position. Right. So that's number one. Number two, by having this policy, right. It definitely creates that liquidity that we might need. So it solves that problem. But I think more importantly than that, simply by having a policy, it helps the family who is going to be your primary resource for care or at least going to be managing your career. It helps them manage that a little bit easier. And if you haven't experienced it, you may not be familiar with it, but if you have experienced it, you definitely know is that there's a lot of challenges, money is one of them, but not everything. And essentially I think what this does, and when my parents purchase their policy, essentially what they're doing is they're doing me and my sister a favor. They're saying, listen, this is going to be allocated to this reason. If something happens could be sudden, we now have the resources to be able to pay for it. We're going to take that off of your plate. Now there's still going to be other things on your plate. Signing, power of attorneys, making sure we're managing the care, all that we can't control that. But this is going to be very important to be able to do that. The next piece that I want to cover and what really makes, I think Brighthouse a unique strategy is the ease of use of the claims process. And this is something that I'll be very transparent. My industry, long term care insurance does not have the best reputation of paying claims effectively and easily. And Brighthouse has done everything in their power to put into this contract tools and methods that allow the claims process to, to be what I consider the best in the industry. And there's two important considerations that really make me proud to represent the firm because I know that when it's time to get claimed, clients are going to be able to receive the dollars as they see fit. So let me kind of explain number one, when you need care, it's not a location conversation, it's a needs conversation. So it doesn't matter whether you want to be at home or in a facility or in Timbuktu or, you know, Tyler, Texas or anywhere else. The reality is that location's not important, it's needs. So what the IRS defines to qualify for this because it's a tax free benefit, is that you need assistance with two or more activities of daily living that we discussed before. Right. We can go through those again in an individual context. But essentially the stuff we do the first hour of every day, if you need assistance with two or more of those, we, you would qualify. There's also another qualification, kind of a trump card that would Kind of also qualify you is that if your doctor defines you as needing severe cognitive impairment, so you're just not, you know, safe to be alone is usually an example of that. Now, the key here is that we uniquely have guaranteed that it's a. It's your physician or physician of your choosing is going to basically make the decision on that. That is very unique in the industry. And we've actually put that in writing in our contracts to making sure that it's what's called doctor adjudicated. And that's important because your physician knows you. You should have comfortability with that person. And yes, they're going to make the judgment on whether you reach that threshold or not, which is, I think, a fantastic solution for clients because they have confidence that, hey, listen, if I need this, my doctor's gonna be able to make that assessment, not a stranger. Okay? The second piece is that we don't know where we're gonna need care. Right. We talked about that earlier. We might need it at home or facility or professional or family or whatnot. What we uniquely allow you to do is we do not require receipts to make the payments. Essentially, how this works is that once your doctor signs off, completes a form, attaches a plan of care, 90 days from that spot, we will simply just start sending you this monthly check, direct deposit into your account. So, for example, if a client was age 80, let's just say this lady had a stroke, hope it doesn't happen, but if it does, her family take her to a doctor, said, listen, mom had a stroke, she needs some care. He evaluates her, says, yeah, she meets the threshold for. For needing assistance with two or more activities of daily living or has severe cognitive impairment. I'll sign that form and attach a plan of care to allow you to qualify for this. You submit those forms? [00:19:25] Speaker C: Yeah, strokes are bad. I do not recommend them. Strokes are bad? [00:19:28] Speaker A: Yeah, strokes are terrible and really sad and difficult on the family. And so what happens is, 90 days after that form gets submitted, we would simply start paying monthly checks of $7,512, tax free, remember, directly to the account. The family could be able to use those funds anywhere that they see fit. You can pay a professional caregiver. You can pay family members as long as they're part of the plan of care that your doctor put out. You can use these funds. If you don't need all those funds, that's okay. You do not need to return them. You can use them everywhere you want. At no point do you need to submit receipts. You might have Receipts. Right. You might want to keep some stuff for, you know, potential tax reasons in the future. But essentially there's no requirements from Brighthouse that you need to submit these receipts. We are essentially just paying you. And the term for this is what's called an indemnity benefit. And we would pay this money until one or two things happen. Either you deplete all of this long term care, which would take exactly six years. Right. Or you pass away. It's whatever comes first. And if you pass away, we would simply reduce your death benefit by the amount of money that you claimed. [00:20:41] Speaker C: Yeah. And Peter, so the average nursing home stay is what, two to three years? [00:20:45] Speaker A: Yeah, the nursing home stay. But the average claim has increased dramatically because remember, nursing homes are only a piece of what we normally see. Most people stay at home. I used to actually quote Lance and I learned this very recently at a meeting, but the average claim used to be four years, just about four years. That's actually increased to 5.1 years recently. And we are seeing some increased claim lengths since COVID And you know, there can be some medical reasons for that. I don't want to hypothesize but we are seeing claim lengths are growing, people are needing click care longer. And you're right. At the end of claims we normally see in facility, but not necessarily right. That is individual. And again, it doesn't matter as far as this policy is concerned where you want to receive that care. [00:21:36] Speaker C: Super, thank you. [00:21:37] Speaker A: So again, that's pretty much, you know, all of the content that I had and you know, if we have any questions, we can go through it. But essentially we try to be very simple. The takeaways here today, I think are to have the conversations with your family early. Right. This is something that involves your family, people that would be impact. Spouses, certainly children, certainly nieces, nephews, family, friends, everybody that would be impacted if something could happen to you. And again, we hope it never happens. But the vast majority of people actually will need care at some point in their lives. So it's important that we have that conversation as soon as possible. And so everybody, all the stakeholders are invested in that. Number two, kind of understand those three questions. Where would I want to receive care? Who's going to provide the care? And three, how I want to pay for that care. And number three, I would highly recommend involving a financial advisor to help plan for that. The earlier you plan for it, the better it is. And I'll just kind of give you my two cents. My parents bought their policy at 67. Right now they had to qualify, and there is some underwriting, but they did have to qualify, and that's made sense for them financially to be able to start planning for that. Me, I was able to buy mine at 40. There isn't a perfect age to buy it. It's always the earlier, the better. It's really when you have the combination of the health, to purchase it, to get approved, number two, the interest. Right. And number three, you have the financial resources to commit to this need. And so that is unique time for everybody. For my parents, it was a different age than I was able to be in, and that's why this is commonly sold through financial advisors, so they can identify when the right time is for each individual client. [00:23:27] Speaker C: Boom. Very good, Peter. Thank you so, so much. Just a friendly ish reminder. This is not an endorsement or a specific recommendation for Peter's product or anybody else's product. We just want to open the dialogue, continue the dialogue from our last podcast to have these conversations. As Peter said, very, very important. The best time to do it is yesterday. Get this. Have these conversations. Feel free to call us as well. Garrett, back to you, my man. Appreciate it. [00:24:00] Speaker B: Well, Peter, I really appreciate your. Your time and expertise on this. Lance, thank you. As always, for anyone out there who, you know, I always like to say, look, we're technically, we're all here for entertainment and education purposes only. We're not here to give you specific financial advice because we don't know your financial situation. So therefore, we can't necessarily do that. [00:24:18] Speaker A: But if you would like to speak. [00:24:20] Speaker B: To a professional, would encourage you to give Lance and his team a call at 903-787-8909 or, Lance, I know you're cool with them. Just stopping by 3200 Troop Highway, Suite 150 in. In Tyler. [00:24:33] Speaker A: What do you call that? [00:24:34] Speaker B: Troopcom. [00:24:35] Speaker C: Troop calm here on Troopcom. Come see us. [00:24:38] Speaker B: All right, thank you both, gentlemen. It was a real pleasure and see you next time. [00:24:43] Speaker A: Thanks, bucks. Thanks, bye. [00:24:47] Speaker B: Lancepedia is for entertainment and educational purposes only. The views and opinions expressed in this show are that of Lance Browning and are not guaranteed to come to fruition. If you have questions about your investments or your financial plans, you should seek a financial professional or give Lance a call at 903-787-8916. We thank you again for watching or listening to the podcast, and we'll see you next time.