UpClose Sugar Land June 2021 - Successful Men in Business

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Three Things to Consider When Purchasing a LongTerm Care Policy

by Amy Sharp

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his past year, Andy Sharp, President and CEO of Altere Financial, LLC, illustrated several different long-term care scenarios for clients when working through their financial plans. Here are guidelines Andy found that could be helpful for those considering purchasing a long-term care policy. Longevity “This is not as straightforward as I originally believed,” says Andy. “But how long you live may make a difference. With a long-term care policy, the earlier you require access to your benefit, the higher the rate of return on your initial premium. But as you age, that rate of return continues to decline. If your family history has an average life expectancy less than the national average (77.8 in the US per the CDC), then a long-term care policy could work in your favor (depending on the policy). However, if you have a

history of longevity, it might make more sense to invest what you would have paid in premiums yourself, forgetting the insurance.” Taxation “Tax-free growth and distribution are certainly buzzwords when it comes to long-term policy benefits,” continues Andy. “But I have seen several situations where the difference in tax benefits between a long-term benefit and self-funding the long-term care through a taxable brokerage account is a wash. What is usually not discussed is your actual tax bracket in your 80s or 90s. If you are receiving a pension, social security, or forced to take large required minimum distributions, self-funded medical expense deductions might be large enough that they actually help your income tax return. If you pay your long-term care expenses from a long-term policy, you potentially

Altere Financial, LLC Andrew Sharp, CFP®, CIMA® 713-899-6589 andrew.sharp@lpl.com www.alterefinancial.com This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.

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lose the ability to deduct these expenses on your tax return.” Emotional Well-being “I have noticed less stress with clients who have a policy in place vs. those that pull money from their portfolio to cover long-term care costs,” explains Andy. “This part of the planning process cannot be quantified. Here, rates of return and tax benefits are no longer relevant. More often than not, I’ve experienced clients wishing they had a policy when the time arrives, or thankful they had some type of coverage where they didn’t have to touch their portfolio. This includes situations where clients had rather large portfolios with the potential to cover costs for several years.” It’s a lot to think about: Peace of mind vs. leveraging your initial premium for a possible higher rate of return. “Everyone’s situation is different,” says Andy. “No part of financial planning is one-size-fits-all, including how to fund potential long-term care.” Schedule a consultation with Andy for a thorough review of your individual situation. “Together, we can decide what’s best for you, your family, and your emotional well-being.”