Long Term Care Pro - Purchasing Long Term Care

Cost of Long Term Care Services

Before discussing the cost of Long Term Care, individuals should be aware that Medicare does not pay for most of the LTC services and while some people qualify for Medicaid, most people won't (needles to mention, qualification for Medicaid will require nearly all of your assets to be depleted.)

Further more, cost of Long Term Care depends on the following subject matters:

Type and amount of care you need,
Where you live,
Which provider you use,
The hours of your home care you need (care is more expensive in the evening, on the weekends or during holidays),
Facilities may charge extra for services beyond basic room-and-board,

Considering above mentioned facts, and combining them with the average LTC cost listed below should give a clear understating of the cost of Long Term Care:

Nursing Home: $187/day for a semi-private room - $209/day for a private room
Assisted Living Facility: $3,008/month for a one-bedroom unit
Homemaker Services: $18/hr
Home Health Aide: $29/hr
Adult Day Health Care: $59/day
---*(Average 2008 LTC cost)

How to select a Long Term Care Insurance Plan and Insurance Company

Long Term Care plans can be confusing and most importantly designed with respect to the needs of every individual separately. It is strongly recommended that the individuals consult a Long Term Care Specialist to craft their plans.

Nevertheless, there are common considerations when purchasing Long Term Care insurance and it should start with the company that you are considering.

Company Rating: The best way to determine the company's financial strength is to refer to the third party rating agencies (A.M. Best, Moody's, Fitch, Standard & Poor's are the main ones).

Agent's Recommendation: Some insurance companies provide solely insurance products and some provide all inclusive services as to insurance as well as investment products. Regardless of the products that the company provides, your agent should have good knowledge of the implication of Long Term Care policies (particularly with respect to asset protection.)

Company Reputation: Companies with a fair policy owner treatment, good service, and providing top-quality long term value.

Besides the rating and capabilities of the company, following major items may also be considered to setup your individual Long Term Care plan:

Daily Benefit vs. Monthly Benefit Plans
	Description	Advantages	Significance
DAILY BENEFITS	This option will pay up to the maximum daily limit for covered services.	Maybe less expensive	Regardless of the service charges, daily benefit will be the maximum benefit. Unused days may extend the policy life.
MONTHLY BENEFITS	This option will provide benefits up to the daily maximum limit times the number of days in the month for covered services.	Monthly pool of expense-money is created (i.e. $250.00 daily benefit x 30 days).This may create flexibility for the purchase of services.	Can be more expensive.

Indemnity and Reimbursement Policies
	Description	Advantages	Significance
REIMBURSEMENT POLICIES	These policies will reimburse only the actual charges occurred (i.e. if the daily limit is $200.00 and the care cost was $120.00, policy will pay the actual charges of $120.00.)	If the daily cost of service is less than the policy daily limit, this will extend the time the coverage will last.	Lifetime policies do not have the carryover value.
INDEMNITY POLICIES	These policies reimburse up to the maximum limit (i.e. if the daily limit is $200.00 and the care cost was $120.00, policy will pay the maximum limit of $200.00)	If the cost of the service is less than the policy limit, remainder of the limit can be used for other types of care that are not covered by the policy.	Benefits received from qualified LTC contracts are received tax-free. Tax-free amounts received under indemnity contracts are limited and adjusted annually to a certain limit ($260 daily limit for 2007)

Restoration of Benefits Options
	Description	Advantages	Significance
RESTORATION OF BENEFITS	This option allows the policy owner to have his used portion of the policy to be restored when he no longer requires assistance for a period of time (thus the total policy benefits will be restored)	Policy benefits are restored to the policy maximum.	If lifetime policy is purchased, there will be no need for this option.

Single Pay, Limited and Annual Pay Options
	Description	Advantages	Significance
SINGLE PAY	This is the option of making one payment and having a paid-up policy	There can not be a premium increase.	Other investment options should be considered to generate income to pay for the policy annually.
LIMITED PAY	This option enables the owner of the policy to pay premiums for 10, 20 or until the age of 65 (policy is paid-up at the end of the limited pay period). It's mostly used by the employers as an executive benefit plan.	There can not be a premium increase after the limited pay period.	Unless the premiums are guaranteed by the insurance company, premiums can be raised during the limited pay period.
ANNUAL PAY	This option enables the policy owner to pay for the policy annually or on a modal basis for the life of the contract.	There can be premium increase within the same pool of people.	Premiums can be lower because the payments are distributed throughout the life of the owner.

Tax implications of Qualified Long Term Care Plans

All tax payers enjoy the same favorable tax-free benefits that they receive from their contracts, yet the taxation of the premium is different for each taxpayer (I.R.C. Section 7702B(b)).

EMPLOYEES Non-owner employees, Employees who are also shareholders of C Corporation where their participation is based on their employee status rather than ownership interest, Employees who are also shareholders of S Corporation, Employed family members of shareholders of S Corporation
Employer Paid Premiums	Employee Paid Premiums	Benefits
Employer paid premiums are excluded from employee's income and deductible by the employer (to the extend of reasonable compensation). Deductible by the employer to the extend of reasonable compensation. If the shareholder owns more than 2% of the stocks, shareholder, spouse, children, grandchildren and parents con not exclude premiums from income. Yet the shareholder may be qualified for limited tax deduction for the self employed. If the shareholder owns more than 2% of the stocks, shareholder and the employed family members may be treated as non-owner employees.	Premiums paid under voluntary payroll deduction plan are included to the employee's income yet the employee may be able to deduct portion of the premium to the extend of the "eligible long term care premiums" as an individual taxpayer". If both employee and the employer contribute a portion of the premium, the portion attributable to the employer is excluded from the employee's income. The employee may be able to deduct is contributions to the extend of the "eligible long term care premiums" as an individual taxpayer". Premiums may not be excluded from income under the cafeteria plans or flexible spending accounts. The tax treatment of the benefits depends on the type of LTC contract. If it is a reimbursement policy, the entire benefit received is excluded from income as an expense for medical care, yet if it is a per diem policy the benefit is added to any amounts by chronically ill taxpayers as accelerated death benefits or viatical settlements (the aggregate exclusion is limited to $270.00 for 2008).	The tax treatment of the benefits depends on the type of LTC contract. If it is a reimbursement policy, the entire benefit received is excluded from income as an expense for medical care, yet if it is a per diem policy the benefit is added to any amounts by chronically ill taxpayers as accelerated death benefits or viatical settlements (the aggregate exclusion is limited to $270.00 for 2008).

SELF EMPLOYED This applies to the individuals who are either business owners as sole proprietors, Partners and members of most limited liability companies, More than 2% shareholders of S-corporations
Premiums	Benefits
Part of the LTC premium may be deducted by self-employed individual himself, spouse or a dependent as a trade or business expense. The premium that may be deducted depends on the individual's attained age at the close of the taxable year and it is indexed each year for inflation. The amount is limited to the following ages for 2008: 40 or less: $310.00 41 to 50: $580.00 51 to 60: $1,150.00 61 to 70: $3,080.00 Over 70: $3,850.00 Above amounts are called "eligible long-term care premiums" and deductible to the extent of earned income the taxpayer receives from the business providing the coverage.	The tax treatment of the benefits depends on the type of LTC contract. If it is a reimbursement policy, the entire benefit received is excluded from income as an expense for medical care, yet if it is a per diem policy the benefit is added to any amounts by chronically ill taxpayers as accelerated death benefits or viatical settlements (the aggregate exclusion is limited to $270.00 for 2008).

INDIVIDUALS
Premiums	Benefits
Part of the LTC premium may be deducted for the individual himself, spouse or a dependent. The premium that may be deducted depends on the individual's attained age at the close of the taxable year and it is indexed each year for inflation. The amount is limited to the following ages for 2008: 40 or less: $310.00 41 to 50: $580.00 51 to 60: $1,150.00 61 to 70: $3,080.00 Over 70: $3,850.00 Above amounts are called "eligible long-term care premiums" and may be added to the unreimbursed medical expenses for the year. Taxpayer may deduct total medical expenses that are exceeding 7.5% of AGI for the year.	The tax treatment of the benefits depends on the type of LTC contract. If it is a reimbursement policy, the entire benefit received is excluded from income as an expense for medical care, yet if it is a per diem policy the benefit is added to any amounts by chronically ill taxpayers as accelerated death benefits or viatical settlements (the aggregate exclusion is limited to $270.00 for 2008).

PURCHASING LTC

Cost of Long Term Care Services

How to select a Long Term Care Insurance Plan and Insurance Company

Tax implications of Qualified Long Term Care Plans

Other questions (that you should ask your LTC Specialist)

Cost of Long Term Care Services

How to Select an LTC Plan & Insurance Company

Tax Implications of Qualified Long Term Care Plans

Other Questions (that you should ask your LTC Specialist)