Phil Castell
Castell Insurance
426 E. Washington St., Sequim, WA 98382
Phone: 360-683-9284 • Fax: 360-683-9026
Phil@CastellInsurance.com
www.CastellInsurance.com  

 

Before I start this month’s column, I would like to take just a moment to provide you with the latest update for 2012 Medicare Advantage plans.

 

In earlier columns I advised that the Medicare Advantage plans would be experiencing an across-the-board 4 percent reduction in reimbursement rates for next year.

 

The Wall Street Journal recently reported that the reimbursement rates for 2012 would in fact increase by 1.4 percent in 2012 as opposed to the scheduled cuts. This can be interpreted as a sign that the politicians are listening to their constituents, as this is a very popular program for millions of people on Medicare. Or, conversely a sign that Obama Care is finding it tough to enact the proposed positions and are making accommodations to various interest groups.

 

Last month’s column was regarding the need for long-term care insurance. I would like to continue that same subject but from another perspective: How you may be able to get some protection without purchasing LTC insurance.

 

In the past couple of years new life insurance and annuity products have been introduced that provide access to benefits to cover the costs associated with LTC.

 

These have been designed primarily for people with assets that can be set aside and are not needed for everyday living expenses. People who may not either qualify for the LTC Insurance or who may choose not to pay the sometimes high premiums now have alternative methods for protection of these expenses.
I will start off by saying the following scenarios generally require an upfront deposit of $50,000 or more depending upon age and benefits desired.

Life insurance

Life insurance can be used in two different ways. You can choose to maximize either  the death benefit or the LTC benefit. The following examples are for illustration purposes only and are designed to show the concept.

 

Scenario one: A single premium deposit of $100,000 will provide an immediate death benefit of $400,000 or an LTC benefit of $6,000 per month for up to 50 months. The LTC benefits are directly deducted from the death benefit.

 

Scenario two: That same $100,000 deposit will provide $175,000 of death benefit or an LTC benefit of $500,000. The LTC benefits are deducted proportionally from the death benefit.

 

This shows how plans can be tailored to a person’s needs and desires as well as financial goals. These plans are medically underwritten, so age as well as health play a pivotal factor in what you would be eligible for.

Annuities

Annuities likewise can be used under two different scenarios. The first scenario also requires medical underwriting.

 

Scenario one: This is an annuity with an LTC rider where the rider will pay a benefit greater than the annuity value. For example the $100,000 deposit may provide a $250,000 LTC benefit. This is funded by crediting the annuity with a lower interest rate than under a traditional annuity.

 

Scenario two: Most annuities offered today allow for a penalty-free withdrawal of your own funds. This requires no medical underwriting and the advantage of this scenario is that fixed annuities usually are credited with a higher interest rate than bank CDs.

 

In addition, new regulations allow for the tax-free withdrawal from qualified (IRA, 401K, 403B etc) annuities for qualified LTC expenses.

 

Annuities also can be used a part of Medicaid planning. Medicaid is a program that is funded jointly by the federal and state governments and is intended for those people who are low-income and with limited resources.

 

Columbia Legal Services (a nonprofit organization) of Seattle has an excellent brochure that explains how Medicaid works regarding LTC. A free copy of this brochure can be picked up from my office as well as from the SHIBA office at Third Avenue and West Washington in Sequim.

 

I strongly recommend that before attempting to navigate the maze of Medicaid planning you seek the services of a qualified attorney that specializes in “elder law.”.You can find a listing of elder law attorneys in the Yellow Pages or contact the local Clallam County Bar Association at www.ClallamCountyBar.com.

After such a heavy subject let’s close with a little bit of fun. The readerboard sign at my office was hit last week by a car and is quite badly damaged. If you can think of any humorous comments that would be appropriate for the sign, please let me know.

 

Phil Castell can be reached at 683-9284 or PhilCastell@msn.com.