If you are someone who has not thought about their long-term career plan, you are not in the minority. Several individuals avoid planning for extended care because it can be a difficult and daunting task. However, whether it be for you or a loved one, organizing steps for long-term care is critical to address in any financial plan.
On today’s show, Marc and John talk to Extended Care Benefits Advisor Raymond Lavine about how to approach the oftentimes overlooked aspect of planning financially.
In this episode, you will learn:
- Where to begin when putting together a caregiving plan
- The right time to begin having long-term care conversations
- The devastation that not having a long term care plan can cause to your assets
- How to utilize a hybrid benefit plan to ensure your assets are passed on to your beneficiary
- And more!
Tune in to ensure that you are taking the steps to have the right plan, at the right place, at the right time.
Today we are going to talk to Raymond Lavine about what I think is one of the most overlooked aspects of a financial plan; that’s caregiving and how long-term care insurance, or long term care fits into that.
Sometimes it’s about putting a caregiving plan together for you, sometimes it’s about helping put one together for someone you love, but I think it’s an overlooked topic. It’s a topic that we almost kind of avoid because it’s not something fun to think about for sure, but it can be a very costly part of your financial plan if you’re not careful for sure.
Sure. And I mentioned that we’re going to talk to Raymond Lavine about this. Raymond is an Extended Care Benefits Advisor. Raymond, welcome to the show.
Thank you for having me on your program, Marc and John.
I think you have a personal story on how you got involved in caregiving and extended care benefits?
If you talk to a lot of agents, a lot of people got into this business because they did have a personal experience. My experience in some way, in most ways, is not any different than anybody else, except I didn’t have to be personally involved.
In some ways it is different because my parents were both lawyers and they were not insurance buyers. They would buy the insurance they needed, but they never owned long term care insurance until my father had his final heart condition.
For the third time, my mother for an extended period of time – now I talk about an extended period of time – it was a couple of years, not just a couple of months. In her seventies, she bought long-term care insurance for herself because she really realized that at that point after my father died, that she would need long-term care insurance for herself.
She’s an estate planning attorney and again, never thought about it, but my father had several heart attacks. He also, for an extended period of time, fell off a horse and broke his hip and his arm; he was bedridden for months. It took a couple of years to recover and rehabilitation before he could go back to work.
Eventually he did, but each time, (my mother and my father were in the same law practice) it disrupted her life. She had to be personally responsible. She finally got to the point where it would maybe be helpful to have caregivers. They may be worth a lot of money, but she finally said, look. I’ll tell a quick story. I was talking to my mother and I asked her: as much money as you have, and you have tens of millions of dollars. I mean, this is not somebody that just says: hey, I got $2 million. I said: why do you want a long-term care plan? I mean, you’re making over $1 million, $2 million a year on income. And my mother’s response is: nobody’s got that much money when it comes to paying for care and lifestyle. So, that was one of the reasons that I got involved in the business; seeing my parents’ experiences, what happened to my parents. It’s a long answer to your short question.
Great answer. There’s always a story behind how someone gets in involved in what they’re doing.
Where to Start?
We want to get into talking about a caregiving plan. Where does someone start?
You can find information about retirement planning, or income planning, or investing or this or that, but you don’t see that much info out there about putting a caregiving plan together. Where does someone start with it?
Well, let me answer that question in two ways.
The first way to answer that question is that it should begin with the wealth advisor. It should begin with the attorney. It should begin with the accountant that you go to on a regular basis, whether it’s once a year or more often.
The wealth advisor, the attorney, or the accountant should be bringing up the topic of: I’m handling your money, I’m handling your estate planning, I’m handling your finances. They should bring up the topic of:
- What would happen if you need needed care?
- Who would be your caregivers?
- Where would you want the care?
- Who do you want to be responsible for the care?
- Do you want your family, your friends, or do you want to hire a professional caregiver?
And then, then the second question is: how are you going to pay for it? One way or another, everybody’s going to pay. Somebody is going to pay for this care.
So I think it begins with somebody’s financial advisor/wealth advisor/attorney/accountant, to bring up the subject and say: we’re doing all these, but it is a part of your estate plan, your financial plan, your family plan that needs to be discussed.
A lot of times, wealth advisors (sometimes even accountants and attorneys) have licenses and will offer plans.
Or to plug myself, promote myself as to say, then talk to somebody like me; talk to an agent, an extended care benefits planner that is knowledgeable about the various plans and about the underwriting.
These are plans that you’re going to own for a long time, just like you may have a long term investment, just like Warren Buffet- when he buys something, he holds onto it. One of the things that people don’t like about thinking about this is that they’re going to own something and they’re going to own it for a long time.
What I always say is that you want the right plan at the right place at the right time.
It might be a year from now, it might be 10 years from now, it might be 25 years, depending on when you buy it. And at what point will you need to act to file a claim for activities of daily living.
So Raymond, do you find that people come to you because… at my age, and I think as the population is aging, I find some of my friends around me (I’m like in my early forties) and their parents are starting to get old. They’re starting to realize that they’re dealing with things and like me, let’s say they may have went through something with a grandparent, or their parents are getting old enough.
Some people who are even older than me, maybe they have a parent who’s even in long-term care and they’re like: wow, I don’t want to have to. They’re going through a lot to try to help them.
Do you find that a lot of people you talk to or come to you are in that situation? I just went through this with my parents. I want to make sure that my kids don’t have to worry about me, if that makes sense.
The answer is yes and no. Yes, sometimes it does encourage people. But, I also have never really understood why people will go through an experience and then they’ll say: well, it passed. Then, they do nothing about it. Unless again, somebody encourages them or brings up the story and says: I remember what happened and I need to do something.
What I also say to people is: there’s no requirement. This is something else. People are in either denial, deferral, or delay when it comes to thinking about long-term care insurance. So, you said earlier, it’s not something that people want to think about. Sometimes, people will say: oh, it’ll never happen to me.
Well, then my thing is: what happens if it does?
So you’re right. At the present, when it’s actually happening is the best time, but sometimes people are exhausted and they’re overwhelmed. They say: well, I’ll do it later. And then they forget about it.
And again, unless people are encouraged, you’ve got to have the conversation. Once people do, once they have the conversation with me (or other people) and whether they get a plan or they don’t get a plan, they’ve had the conversation.
They know what the issues are. Then, they can say: yes, I want to do something. And then once you won a plan, periodically take a look at it or call me and say: what do I got?
That’s the other thing too, that I find is that people don’t really have a plan. There are organizations like the Conversation Project or they’re even apps where people can incrementally create a plan.
Once they do, they feel better about it. But you gotta get with the conversation. You got to say: what’s going on here and how can I avoid what I had to go through with my friends, my parents, my family?
That’s just something where you have to be motivated and you have to be encouraged to have the conversation. And of course, you have to find somebody that you trust and that asks the questions because people are afraid to buy something that they don’t really think they know or understand.
In your firm, you have clients that trust you, you have clients that are saying: I’m going to write a check or transfer funds for the management of their money.
They have to trust you. And this is where if I do my job correctly, people trust me and they say: Raymond really cares. You just ask the question, I really understand what they need, and that I can help them design a plan that when they need care ( I call it “activities of daily living”).
When they need that plan, it will be the right plan, the right place,at the right time.
And it isn’t going to solve all of their problems because family is still going to be involved, and if you’re not well, you’re going to be cranky and miserable. But, it is always better if you have the choice of: where do you want your care and who will be your care providers?
You’ll have family involved, your spouse, your friends, but also have a way to pay for it. So that will take a lot of the pressure off of people to say: I’ve got the support system. I really have people that can help me. And if I have that kind of help and assistance, I’m going to live a better life. I can still do things.
And that’s also something that people are afraid of. They think that if they need caregiving, that their lives are over. Your life isn’t going to be over. You’re still going to be able to do things in your life. I’ll give you two exemplary examples of this:
In 1932, this country elected a president who had Polio and he was in a wheelchair from about 1924 until he died. He ran the country, he was a Commander in Chief during World War II. He needed care. He needed help.
There was a program called Ironside. Raymond Burr was in a wheelchair, but he was also a police commissioner. And he was able to do his job. He had to have caregivers help him, but he was able to live a life. He wasn’t isolated.
They were both able to go out and be either President or this fictional police commissioner.
When is the Right Time?
Is there a right time to start having those conversations, whether it’s someone experiencing any decline in whether it’s physical, mental? Is it too early to have the conversation or ever too late to have that conversation?
When I first got started in this business, you could get a plan at 18, as long as you were of legal age because of changes in long-term care business. The age has incrementally gone up in most plans. Now it won’t start until you’re 40. Some plans may be a little bit earlier, but mostly it’s in your forties. Now I have three criteria that I say to people:
- All of these plans have some level of underwriting, meaning that depending on your health will also depend on what I can recommend. So, the older you are, the more health issues you have.
- Financial suitability. You gotta have a plan that you can pay for. Do you buy a plan using your free cash flow? Do you have other assets you can transfer into a long-term care plan such as life insurance? You can treat it for annuity. You can transfer other fixed types of investments that you can transfer into cash. There are other ways to do it.
- What do you think this plan is going to help you to do? What do you want your planning to do?
And so the earlier you can do that, it’s easier for any agent at underwriting. The younger you are because you have fewer health issues and declines, the older you get, usually the more health issues you have, and the higher rates of declines and the usual things people have as they get older: have skeletal issues, diabetes-that’s a really difficult one to underwrite. People have strokes also.We have an epidemic of obesity. A lot of us are not just a little overweight. A lot of people are a lot overweight and that’s an issue.
Then for the big tsunami, the big stuff, I was just reading in the economist( the August 29th edition), is cognitive disability-call it dementia, call it “senior moment.” It’s dementia. There’s going to be a big deal.
And that’s extremely expensive because it’s a disease of the brain, but you might live an extended period of time. And how’s that going to affect a family? Is that something that’s tested during underwriting, or is that something that a doctor would write down on a report that that’s part of underwriting?
Anything that you say,a doctor can write down. So if you say: I’m forgetful. If the doctor writes down:the person is forgetful, it may be in the underwriting where they say: what’s this forgetful?
Sometimes somebody may take a prescription that might be also for a cognitive thing, but it really is for something else. So you have to delineate that.
If you’re under 60, most times it’ll be an interview. It won’t be a cognitive review. Again, the younger you are, the better health you are, the less issues you have with dementia. It isn’t all about Alzheimer’s. It could be, it could be something else.
So, sometimes they will pick it up if you have an interview or they see something in the doctor’s records of which then sometimes we can get it over-written. It happens more often if somebody is in their sixties, seventies, definitely in their eighties; it could be an issue.
Maybe we should take a step back. So we’re talking about plans and policies and underwriting, but what do these cover? What is the actual (whether it’s medical legal) definition of what constitutes long-term care?
Long-Term care by definition, is an insurance plan in two parts. You can either have a traditional plan, or you can have a hybrid plan:
A traditional plan is a health insurance plan where it pays for your care services, if the care activities of daily living is 90 days or more
There’s also what’s called a hybrid plan, which is on a life insurance with a long-term care rider.
They both do the same thing; they will pay for in-home care services, meaning your condo, your townhouse,whether you live with friends or family, if you’re in a care center or dementia center- it will pay for it.
We’ll pay for those services, but it will also provide, if you were at home, it will also pay an additional amount up to a certain amount for home modifications. It’s not doing a makeover of your kitchen, but it’s things like: grab bars, lighting, ramps, wheelchairs, things of which you may need to help you with your activities of daily living in order to stay at home.
What, what actually constitutes those activities of daily living?
Activities of daily living means: it’s not the illness you have, it’s what the illness does. For example, I had a heart attack while I’m still able to function. So, if my heart attack had affected my activities of daily living:
Eventually, if I get dementia, it will pay because not what the illness is, it’s what the illness has done to you. That causes a chronic illness, where you need professional services. I’ll give you a personal example: my mother, within two months, broke both her arms in two different situations: one falling down the stairs, one I forgot.
Anyway she fell and broke her arm. So she was able to then activate her long-term care plan because she had a permanent disability, which then limited her activities of daily living.
This is where people get annoyed, where they file a claim. And then the insurance carrier says: well, we can’t do it because what you have to show is not what the owner says is how it’s affected your activities of daily living.
So somebody who can’t do those activities of daily living, I think you mentioned 90 days, is that what is typical?
Yes, the typical thing is 90 days, or more, and is certified by the doctor. If you’re dealing with me and you’re having issues with either filing the claim or working with the doctor to explain, there are independent services that I associate with that could help you with that process: filing and also finding the kind of care services you need, or if what the right care center would be if they need to transfer to one.
The misconception is that Medicare is going to have something built into it. A lot of times, I’ll ask: what’s your plan for long-term care? They’ll say: oh, I have Medicare, I have it covered. They don’t realize that it’s not really going to provide what they think it’s going to provide. But with that said, there, there is, for that 90 days, some built into Medicare where you can actually get some help to kind of get you through that gap.
But it’s specific to the illness or the accident. Yes, for a short period of time, Medicare will pay for in-home services or acute care services in an acute care center up to a hundred days, if it’s an acute care center or for a short period of time with whatever the illness/accident is. They could send in somebody to help me with rehabilitation or other things we add at home for a short period of time.
But if it’s the kind of illness where then it becomes a preexisting or acute illness, then Medicare will not cover it for the long-term. In fact, if you go to the Medicare site, it says that Medicare is not for long-term care.
And so what happens if someone doesn’t buy it? You don’t have an insurance policy.
What does long-term care cost? Well, it took me a number of years to understand how to say this to people, but there’s no requirement to own a long-term care plan.
If you want a car, you have to have car insurance, or if you own a home.
You don’t have to own a plan, and you have the option of family, friends, maybe Medicare, maybe Medicaid, maybe the veterans administration, maybe there might be services within your area, for certain transportation services.
But the reason, and the benefit of owning a long-term care plan is that it gives you choices. That’s what people want is- choices; but, they also want to have a way to pay for it.
So if you think, and this is where you’re having the conversation with your wealth advisor or your accountant, or your attorney is to say: look, if I needed care and whether you’re making $50,000 a year or $2 million a year:
Where’s your cash flow going?
What are you doing with your lifestyle?
So if you have your family and you’ve got your hobbies and your homes, and maybe you have second families, maybe you have third families and things that you’re paying. People may not always be as lifestyle-rich, or as much cashflow as they think.
So, having a long-term care plan is a reserve fund in order to pay for those care services. Rather than have whatever income you get is after tax, you’ve already paid taxes on it if you want a long-term care plan.
One of the things that is helpful to people is it’s average. There’s no tax on it. Whether you have $1,000 a month or $10,000 a month in, and you’re getting benefits, there’s no income tax. And that’s something that you have to put in your file with your accountant to say: it’s tax-free.
Now, if you want a hybrid plan- if you don’t use all the cash value benefits, the cash value that you’re not using, if you die, goes to your beneficiary tax-free. So there’s both the benefits of paying for your care to people that it matters to, you don’t have to deal with tax situations.
So while we’re on the subject of tax, it’s my understanding that there can be some tax breaks or some tax benefits on the premium as well?
Yes, if you have an LLC, a C corporation, depending on what your tax status is, certain amounts of your premium can be deducted.
If you’re an individual or having an LLC, you can deduct up to depending on your wage bracket, a certain amount of that premium could be deducted from your income tax.
Now, if you’re a C corporation, let’s say that the corporation is paying for your premiums. It’s a deductible, and it’s not an expense to the person that owns the plan.
So different variations depending on your tax status, what can be deducted from what premiums can be deducted.
When you were mentioning the hybrid, are you seeing that trending where people are using those plans more often, or are still people purchasing the regular straightforward long-term care insurance plan?
Hybrid benefits have become common, especially for the real successful people have income where they have assets that they can transfer. It’s become the plan of choice; people like it because they like the idea that if they die that it isn’t that they’ll lose it. The value of the hybrid plan is that the beneficiary gets the proceeds.
It’s become based on: for people that don’t have large incomes or assets a traditional plan is the better plan. But, if somebody is concerned about: I put all of this money in and if I die, nothing will happen, the hybrid plan has become an interesting choice.
In terms of filing claims and utilizing this insurance, how does it work?If someone gets diagnosed needing long-term care, do they get off of it at some point?
And what happens if they have another occurrence down the road? Does this plan keep paying throughout, as long as they’re paying the premiums?
Yes. Let’s say you have an accident and you break your hip, or you have a stroke or a heart attack like I did, and you recover. Then you just notify the carrier: I’m back to doing whatever it is I’m doing. I don’t need care services. Then it’s suspended.
When you need it again, then you just file again. Tell your doctor: look Raymond needs care and it’s going to certainly be beyond the 90 days. And here’s the issues. Therefore he’s going to need caregiving services because there’s certain activities of daily living he’s not going to be able to do.
Makes sense. I remember back in my insurance days when I worked with Mass Mutual, we sold a bunch of those riders.
They’re one of those companies that are still hanging in there, and still selling it. I know a lot of them have dropped off.
In the years past it’s changed quite a bit. In that time, the rider was actually fairly low, it was a pretty cost-effective rider at the time. But, people would always balk at when we would get the long-term insurance.
And it was always kind of like this play on: well, there’s always Medicaid, right? Until they changed the look back, it was always like long-term care planning was more about hiding assets than it was actually really planning for the cost of it because you’re like: I’m not going to have enough money anyway. I don’t have enough money right now to pay for the long-term care insurance, so I’m just going to ride it out and see what happens. If push comes to shove, I’ll go into Medicaid.
How do you look at that? And those conversations it’s like, where does one meet the other?
I’m a CLTC. And one of the things that I’m encouraged to say is: do not speak ill of Medicaid. I don’t. If a person is of a limited means, meaning of income or assets, it’s more likely that they may need eventually to be on Medicaid. And there’s nothing wrong with it.
People think of it as a welfare plan. It’s actually something that we paid into. There’s no disgrace. It happens to people if people need it. If you’re a flow under success, if you go to an elder care attorney and they said: transfer your $5 million and give it to your kid, i don’t think that’s going to happen.
It’s not the same as planning a thing that I would do, but, if somebody can be convinced to transfer it, then that’s what people are going to do. Medicaid was designed for people that have limited resources. If they needed care, they would use Medicaid. But then again, they also don’t want to use their own assets or have to sell assets. That could be a problem, because let’s say somebody is making $150,000/$200,000 a year, but what’s their lifestyle? They might be spending $25,000 a year.
Then, if you need care and it’s now costing you $5/6/7/10,12,000 a month, depending on what services you need, then what happens? They’re going to call up you or Marc and say: here’s my situation. What can I sell? How can I make more money for my lifestyle and pay for my care?
They’re going to have the conversation with their wealth advisors: where can I get the money in order to pay for my care and keep my lifestyle? Let me say it this way: not just their lifestyle, but the lifestyle of their family and the responsibilities people have: kids that have special needs, or their children didn’t always make good decisions, or they have second families.
There may be a lot of things that people are using their money for. This is where owning a long-term care plan comes in; it helps to alleviate at least the financial risk of affecting your lifestyle. You have money to pay for your caregiving.
Back when I was selling a lot of these plans, I remember there were some that were like these partnerships; it was looking at that interesting gap. Like, you’re doing well, but you probably could benefit from a long-term care policy. Then, there was like in-between space where it was like: oh, it’s kind of expensive where they would build in these lumps of assets that you could hold onto before you would trigger Medicaid. Do those still exist? Or is that still something that you guys work with?
Partnership works on traditional plans. I’ll give you my personal perspective. I think, maybe 10 years ago, some of the partnership plans may have been valuable. I think it’s just a selling tool. What partnership plans means is: up to whatever the value of your current long term care plan. If you use up all the benefits of your plan and you use up all your assets, then the amount of money let’s say it’s $300,000) then you could save $300,000 from your assets.
I never talked to people that much about the partnership, but I personally believe it’s just a selling tool, something to make people feel comfortable. I don’t think it really matters because when you need caregiving, you’re not going to think of safety planning.
You’re going to think of: how do I have the money to help the person love and care about? How can I help them to live the best life they can? That’s what people are thinking about.
When it really comes down to it, they’re not thinking about estate planning partnerships. I think about Medicaid, they’re thinking about: how I can help the person that needs caregiving survive, but also the survival of the family, because people that are taking care of family members, there’s an economic cost to them.
I read it almost every day. People send me articles, whether it’s living in the area or if they live in some other part of the country, the economic cost that people have to spend on airfare, people have to put their careers and their lives and families on hold.
It’s untenable being a caregiver. People will say: oh, isn’t it wonderful? Gee, I’m giving back to my parents the best gift that a parent can give to their children or children give to themselves. If they have a care plan, they can be a family and not just part-time or full-time caregivers.
I love my wife. We’ve been married 38 years, but I know that I would be a lousy caregiver. I can make sandwiches and other things I can do. But from lifting, cleaning wounds, and all that stuff, it’s just not something I do.
I mean, would I do it? Yes. But I’d much rather have a professional do it; somebody that knows how to do it than Raymond Lavine.
Caregivers have a lot of issues too. You ask somebody how they’re doing? It’s a caregiver. Oh, I’m doing fine. But if you tap them, they’ll either break down or start crying or sort of say: look, it’s really tough. I feel isolated and I’m tired. I’m exhausted, I’m overwhelmed. I got all these responsibilities.
What I also say to people is: when you take over helping somebody with their life, you’re helping somebody who has a business. You yourself are a business: you have bills and you have expenses and you make decisions. You are a business.
And if you don’t believe me, ask as an estate planning attorney. Taking care of somebody: their life, their home, their possessions, their debts, their assets, you’re taking care of somebody’s business. It’s personal business, I agree, but it’s a business.
And I’m addressing this as, like you said, it’s tough for people to do. A lot of people don’t, but it’s definitely something that’s critical to address.
So we’re just about out of time, Raymond, thank you for being on the show.
This has been really enjoyable. Thank you for having me on your program. How best can someone find out more about you or get in touch with you if they have questions?
My phone number: (253) 275-6091. I live in Washington, but I do have non-residential licenses in other states. Or you can go to my website, www.lavineltcins.com .
Thank you everyone for tuning in to today’s episode.