Advanced Markets Minute – March 2023

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LTCi as Asset Protection

Welcome to the Advanced Markets Minute in both print and audio form. Today’s article is called “LTCi as Asset Protection.”

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Your clients could face threats to their assets from taxes, creditors, lawsuits…a variety of sources. But perhaps the biggest threat to their assets is their own health. If your client needs long term care for an extended period of time, their assets could evaporate just as quickly as with any lawsuit or creditor. Luckily, there is asset protection available against the health threat.

Long-term care insurance is health insurance, but it should also be viewed as an asset protection tool. It may be the only thing that can help protect an individual’s assets from being depleted by the high costs of long-term care services.

Some clients say they will self-insure, or in other words just pay for the care themselves. Many who say this don’t fully understand how high the cost could be and may not have the assets to pay it. Others may have enough wealth to pay, but usually that means selling off assets. The assets sold off and used to pay for care are gone, of course, but even beyond that the act of selling them off usually creates a taxable event of some size. Whether the tax owed is ordinary income or capital gains, it means more of the assets need to be sold to net the same dollar amount. This also means the total assets will shrink even faster.

Long-term care costs are considerable. In 2023 the national average for semi-private care in a facility is $105,465, which translates to $289 per day. By the time your client needs care the costs are likely to be higher. For example, our Cost of Care Calculator, available on our website, says that assuming 3% inflation the national average cost of semi-private facility care in 25 years will be $220,819 per year, or $605 per day. A little more than double today’s cost. And says that 70% of people who turn age 65 will need some form of long-term care in their lifetime. Many of your clients will face those costs in the future.

We have two great solutions for those looking to protect their assets. One is our standalone long-term care policy, a leader in the industry. The other is our long-term care rider available on our IUL policies. Both provide funds for care as well as a care coordinator and Mutual’s extensive experience in handling long-term care claims.

Asset protection in general can be complicated and expensive. However, protecting your assets against the cost of extended care can be simple and we may be able to provide solutions. View the Long-term Care Cost-of-Care Calculator on SPA to view the current costs of care across the country.

Call us in Advanced Markets if we can help you help your clients with this idea.

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This is for informational purposes only. Recommendations for financial product or financial strategies must be suitable for the individual based on their circumstances. Mutual of Omaha does not give tax advice.