Volume IV, Issue 2

LTC Insurance Planners


Long-Term Care Issues—Planning for Today and Tomorrow

These days, it is common for many people to live 20 or more years beyond the normal retirement age (NRA). As the years go by, financial and estate plans that once seemed satisfactory, may need to be reevaluated and adjusted. Some areas of special concern are asset management, health care, and living arrangements.

Your Will

A will is a formal, legal document instructing your survivors in the settlement of your estate. Often, the prospect of writing a will brings up feelings of discomfort. And yet, devising a will is one of the most important factors in estate planning, and one that should promote feelings of security. Having a will in place means that heirs will be provided for, and your distribution wishes will be met. Like many people, have you postponed the task of writing a will? Or, is it time to review a will drafted years ago?

Composing a will—and keeping it up-to-date—helps to ensure that you control how your estate is divided. However, an estate that is not covered by a will (also known as an intestate estate) will bring into effect your state's intestacy rules. These rules govern how your estate will be divided and by whom. Some people may believe their estate is too minor to need a will, but even if you believe this is the case, you should consider writing one anyway. The reason is simple: If you die without a will, you automatically forfeit the chance to direct the dealings of your estate. In addition to facilitating bequests, a will is an opportunity for you to designate your own executor, guardians for minor children, and other fiduciaries.

Managing Assets and Making Decisions

As you get older, you may no longer want to continue managing your assets, and may wish to transfer that responsibility to others. A variety of arrangements are possible to achieve this objective, among them:

1) Revocable and Irrevocable Trusts. If you want to retain control over property, while delegating responsibility for daily management to others, you may want to consider a revocable trust. This arrangement allows you to monitor the management of your assets, yet offers the flexibility of changing the trust as experience and circumstances suggest. As added protection, a revocable trust may remain unfunded as long as you are legally competent. Alternatively, if you wish to relinquish ownership of assets altogether, you could establish an irrevocable trust. Trusts can also be used to avoid probate, minimize your potential estate tax liabilities, or to help fund the payment of estate taxes.

2) Durable Power of Attorney. This allows you to appoint a trusted relative or friend as a representative in legal and financial decision making. The powers granted may be limited or broad in scope, and may vary from state to state. Also, consider drafting a living will and health care proxy. A living will is a medical directive, written in advance, that sets forth your preference for medical treatment in the event you are unable to direct your own health care. A health care proxy allows you to appoint someone to make medical decisions on your behalf.

Long-Term Care

There are many long-term care options for those who are unable to live independently, but are not yet in need of full-time care in a nursing home. Assisted living facilities (ALFs) provide a protected environment with a semblance of independent living. Generally, some daily meals are provided in a communal dining room and minimal assistance, such as with washing and dressing or with medications, is available. Continuing care communities offer a combination of independent living and health care support. If family members work, adult daycare centers, either publicly or privately funded, can provide social opportunities and activities to relieve boredom and provide companionship. In some cases, home health care may be the solution. A financial professional can help you determine whether long-term care insurance (LTC) may be right for your situation.

Periodically Review Plans

You should periodically review your existing financial arrangements, because your needs will change with time. In the transition to the later stages of life, fresh needs and concerns, such as those involving asset management, health care, and living arrangements, may call for revisiting plans made at an earlier age.

Your Benefits and the New Medicare Act

In December, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was passed into law, offering new benefits to Medicare recipients. The legislation includes programs to discourage companies from eliminating retiree health benefits, as well as giving approximately $25 billion to rural hospitals and their workers.

New Prevention Benefits

In addition, the Medicare Modernization Act aims to help participants prevent and detect serious health problems. Seniors enrolling in Medicare Part B will have six months to take advantage of a comprehensive physical exam, and will also be able to have medical tests to detect the beginning signs of heart disease and diabetes.

Drug Coverage

Beginning in May of 2004, beneficiaries will have the opportunity to purchase Medicare-approved discount drug cards, which may help holders save as much as 10%–25% on their prescriptions. Medicare will join efforts with private companies to offer these cards, which will cost approximately $30. Deciding whether to purchase a discount drug card will depend on your prescriptions, the pharmacy you use, and the type of coverage you already have. There will be several types of cards available, and they will likely each offer different types of coverages for various drugs and pharmacies. You can learn the benefits of the available cards at www.medicare.gov. Enrollment begins in May 2004 and extends through December 31, 2005.

Those with special income needs will have additional benefits available. In 2004, singles with income equal to or less than $12,569 ($16,862 for married couples) may qualify for a credit of $600 on their discount cards. This amount will be indexed for inflation in the coming years, but in order to qualify, recipients cannot have pre-existing Medicaid drug coverage, employer coverage, or TRICARE for Life.

In 2006, Medicare will directly offer prescription drug coverage. Beneficiaries will then choose to: stay in their current plans without signing up for the new benefit, sign up for a stand-alone drug coverage plan, or sign up for a private plan that offers Medicare services and drug coverage.

Those who choose to sign up for the drug benefit in 2006 will pay an estimated monthly premium of $35. There will be an annual deductible of $250 coupled with a co-payment of 25% for the annual cost of drugs up to $2,250. For drug costs $2,250 to $3,600, recipients will pay the full amount. Once the $3,600 mark is reached, Medicare will cover 95% of prescription costs from that point forward. The recipient will cover the greater of 5% of these expenses or owe a co-payment of $2 to $5.

There will be no coverage gaps for those who qualify for Medicare and Medicaid. In addition, they will not owe deductibles or premiums but will owe a co-payment of $1–$3 for all prescriptions. Nursing home residents will be exempted from the co-payments altogether.

In 2006, those who meet certain income qualifications will also be exempted from premium payments and deductibles. Singles with income around $13,000 and assets below $6,000, and married couples with income of $17,600 and assets under $9,000, will likely qualify for these exemptions. Their co-payments for prescription drugs will be approximately $2–$5. Singles with incomes of $13,000–$14,400 per year with assets under $10,000, and married couples with incomes of $17,600–$19,500 with assets under $20,000, will also have no coverage gaps. Their premiums will be based on a sliding scale, with a reduced deductible of $50 and a co-pay of about 15%. Once their costs reach $3,600 annually, they will have a co-payment of $2–$5.

In 2005, Medicare's Part B deductible will increase to $110 with further annual increases. In 2007, income qualifications will apply to premiums owed. Singles with incomes over $80,000 and married couples with incomes above $160,000 will owe premiums based on a sliding scale.

The Medicare Modernization Act of 2003 brings many changes to the Medicare program. Time will tell how these new advantages will work for you and your particular situation.

Health News

Cod Liver Oil

Researchers from Cardiff University in Wales (HealthDayNews, 2004) have found that cod liver oil may help to reduce pain and swelling in osteoarthritis patients, as well as slow down the process of cartilage degeneration. The study, composed of 31 individuals scheduled to have knee joint replacement surgery, offered extra-high-strength, 1,000-milligram capsules of cod liver oil to half of the participants, and a placebo to the other half for a period of ten to twelve weeks. 86% of participants receiving the cod liver oil tested as having none or significantly reduced amounts of cartilage-damaging enzymes. Only 26% of the placebo group produced the same results. In addition, joint pain caused by certain enzymes was also significantly reduced for those who took the cod liver oil. Researchers say their findings suggest that cod liver oil can help protect cartilage, reduce pain, and may reduce a patient's future need for joint replacement, as well as slow the beginnings of osteoarthritis.

Eat Your Vegetables

In a study spanning more than four decades, Northwestern University has found that middle-aged men, who eat at least a cup and a half of fruits and vegetables per day, pay less for health care when they become seniors. Men who had diets rich in fruits and vegetables spent $3,239 less in medical costs per year from 1984 to 2000, as compared to those men that ate the least. While such factors as age, smoking, and obesity were not considered, the results appear to offer further support for the dietary pyramid (American Heart Association, 2003).

Senior Safety

As we age, our vision, reflexes, and strength may be affected. Those age 65 and older have a one out of three chance of suffering a fall, according to the Centers for Disease Control (CDC, 2003). Reduce the likelihood of tripping by making sure floors are free of electrical cords, area rugs that can easily bunch up, and small furniture items. Keeping areas well-lit and wearing non-slip shoes can also be helpful. Install bathroom safety features, such as non-slip rugs and bath mats, as well as firmly mounted grab bars. Above all, stay fit. Balance-improving exercises are a proven way to maintain strength and reduce chances of injury.

Heart Disease

If you suffer from heart disease, or live with someone who does, you may be interested in learning about the automated external defibrillator (AED). The AED is a device that can save lives with the proper training. If someone suffers a heart attack, an AED can be used to give a shock of electricity to the victim, and has the potential to make heart attacks less fatal. According to the American Red Cross (2003), survival rates decline 10% per minute for those who have suffered cardiac arrest. Family members who act quickly, and are trained to use an AED, may be instrumental in saving the lives of their loved ones. For more information on AED training, log on to www.redcross.org.

 The information contained in this newsletter is for general use and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. Therefore, information should be relied upon only when coordinated with professional tax and financial advice. Neither the information presented nor any opinion expressed constitutes a representation by us or a solicitation of the purchase or sale of any securities. This newsletter is published by Liberty Publishing, Inc., Beverly, MA. Copyright 2004.