Presented by: Denise Gott, CLTC, MBA ACSIA Partners, LLC

1. Long-Term Care: Attorneys Need to Know Presented by: Denise Gott, CLTC, MBA ACSIA Partners, LLC

2. Extended Chronic Care Living in an institution Living in the community: Home Health Care Adult Day Care Assisted Living Nursing Home Care 18% 82% Living in the community U.S. Department of Health & Human Services: HHS.gov Content last reviewed on July 6, 2017

3. Common Misconceptions • Just For Old People • Home Care Is Cheap • It’s Just “Nursing Homes” • It’s Not Going to Happen to Me • I’ll Self Insure

4. All Ages Need Long-Term Care

5. An Aging America

6. An Aging America

7. Impact of Caregiving On Women • Upwards of 75% of all caregivers are women1 • They spend as much as 50% more time providing care than men1 • Women who spend nine or more hours a week caring for an ill or disabled spouse increase their risk of heart disease two-fold1 • 28% of caregivers have a child or grandchild under the age of 18 living in their household2 • 20% of caregivers performing 1 or 2 ADLs for their care recipient say that their health has deteriorated2 Source: 1Family Caregiver Alliance/National Center on Caregiving; 2AARP/NAfC Caregiving in the US (2015)

8. Impact of Long-Term Care • Elder care will replace child care as the number one dependent care need in the next century, as 1 out of 3 working adults will be caring for an aging family member. (University of California at Berkeley Study, Quoted USA Today, 7-14-94)

9. National Median Long-Term Care Costs Home Health Assisted Living Adult Day Care Nursing Home $20/ hr1 at 40 hrs/wk = $41,600/year $120/day1 = $43,800/year $69/day1 = $25,185/year $250/day1 = $91,250/year 1Genworth 2015 Cost of Care Survey

10. Median Cost for Daily Nursing Home Care Source: Genworth 2015 Cost of Care Survey

11. Costs to Employers… • U.S. businesses lose up to an estimated $33.6 billion per year in lost productivity from full-time working caregivers. (AARP Fact Sheet 271, October 2012)

12. Who Pays for Long-Term Care Source: Medicaid and Long-Term Services and Supports: A Primer, The Henry J. Kaiser Family Foundation, May 26, 2017.  Numbers reflected are by payer, 2013

13. Medicare Nursing Home Benefits • Days 1 – 20 All Costs @ 100% • Days 21 – 100 100% after daily co-pay $167.50 • Days 100+ Nothing SKILLED CARE ONLY

14. Medicare Home Health Benefits Service Medicare Pays Skilled care combined with custodial care Custodial care without skilled care 100% for Visits Nothing Legislative reform cutbacks

15. Medicare = Short-Term Care Average Number of Days People Have Skilled Care 23 Days Health Care Financing Administration, 2006 Statistics

16. Private Health Insurance Pays LTC Costs Similar to Medicare • Group or Individual Health Plans • HMOs • Retiree Group Health Plans • Medicare Supplements • Disability Income Plans

17. Medicaid Limitations Below $2000* in Assets Look Back Audit No Cap on Penalty Period Mandated Estate Recovery Limited Choices * some states vary slightly

18. Transferring Assets Lose Control Divorce Misuse of Funds College Financial Aid Financial Difficulties Lawsuits Cost-Basis Early Death of Adult Child

19. Demographic Trends (Workers vs. Social Security Beneficiaries) 1945 2017 2035 41.9 to 1 2.8 to 1 2.2 to 1 Social Security Administration: The 2017 Annual Report of the Board of Trustees of the Federal Old-age And Survivors Insurance and Federal Disability Insurance Trust Funds

20. LTC Insurance Tax Incentives Source: 1https://www.irs.gov/pub/irs-drop/rp-17-58.pdf • Tax-free benefits up to $360/day or actual charge, whichever is greater1 • Portion of premium counts as a medical expense for individuals1 • Premium tax deductible from State Income Tax • Policies issued prior to 1/1/97 “grandfathered”

21. LTC Insurance Tax Incentives Business Owners: C-Corp – 100% Deductible S-Corp, LLC, Sole Proprietors – 100% of Allowable Premium Based on Age Non-ERISA Benefit – Employer can be selective as to who they cover with LTCI benefit

22. Executive Carve-Out Executive Carve Out – Case Study C-Corp owner has 25 employees. Wants LTCI for himself and spouse. Corporation pays premium for owner and spouse. Corp takes a full tax deduction, does not pay payroll taxes, premium is not income to the executive and policy is fully portable at retirement.

23. Premium Deductibility Following are the deductibility limits for 2018. Premium amounts for the year above these limits are not considered to be a medical expense. Source: https://www.irs.gov/pub/irs-drop/rp-17-58.pdf

24. Executive Carve-Out Executive Carve Out – Case Study • Corporation can establish 10-Pay and take full tax deduction • Owner has fully paid up policy in 10 Years • Spouse included • Return of Premium

25. Odds of Needing Long-Term Care Someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and supports LongTermCare.gov updated 10/10/2017

26. Comparing the Risks

27. Comparing the Risks For every 1,000 people: • 5 will have a house fire (average loss, $3,428*) • 70 will have an auto accident (average loss $3,000*) • 600 will need long term care (average cost $50,000 to $60,000 each year**) Sources: *Society of Actuaries, 1995, **HIAA, 1994

28. LONG TERM CARE AUT INSURANCE R’S CE For a Secure Retirement Completes Financial and Estate Plan MEDICA SUPPLE COVERA LIFE INSURANCE MEDICARE STOCK

29. LTC Benefit Plan Design • Differs by State & Insurer • Premium Determined by State, Health, Selected Benefits • Guaranteed Renewable

30. LTC Benefit Plan Design The 5 Main Choices

31. PLAN DESIGN Daily Benefit Amount How Much Per Day or Per Month for Nursing Home Care?

32. PLAN DESIGN Home Health Care Coverage 50% or 100% of Nursing Home Benefit

33. PLAN DESIGN Other Community Alternatives Adult Day Care Centers Assisted Living Facilities

34. PLAN DESIGN Comprehensive Coverage Home Health Care Adult Day Care Assisted Living Nursing Home

35. PLAN DESIGN Waiting Period 90 Days or Less

36. PLAN DESIGN Benefit Pool / Pool of Dollars At Least 3 Years Preferably 6 Years Ideal = Lifetime

37. PLAN DESIGN Inflation Protection Many options are available 3% or 5% Simple or Compound GPO/Deferred …and more

38. PLAN DESIGN Qualifying For Benefits (w/ 90 day Certification) Bathing Dressing Eating Toileting Transferring Continence

39. PLAN DESIGN Qualifying For Benefits (w/ 90 day Certification) Cognitive Impairment

40. Guaranteed Renewable Policy Can’t Be Cancelled When You Pay Premiums

41. Accelerated Payment Option (APO) • Insurance companies have developed a pre payment plan allowing the corporation to fund the LTC program during peak earning years: • Pay to age 65 • Ten pay • * Subject to state availability

42. Savings vs. LTC Insurance Annual Cost of Care in 40 years $1,500 @ 8%X 40 years $ 388,585* $ 485,175 *Before investment fees & taxes

43. Company Strength AM Best Ratings (Don’t Stop with Ratings!)

44. Do I Qualify? • Answer questions on application • Sign a release for medical records • Possibly participate in a telephone interview • Possibly participate in a face-to-face interview

45. Personal Consultation • Determine suitability of LTC for your individual family situation • Fully disclose medical history to agent and authorize release of doctor’s records (PCP) • Insurance company will underwrite your case and make a final decision on acceptability • If coverage is approved, final benefit selection is made and payment mode selected • Depending on State Laws, LTC companies require a minimum of two months’ worth of premium with application, which is fully refundable if declined

46. Long Term Care Insurance Summary • Protects your lifestyle if it happens to you, your spouse or your parents or in-laws • Protects your retirement savings • May be the only thing that keeps you out of a nursing home by providing money for 8–10 hour shifts of home health care • Should be purchased as young as possible to lock in at lower premiums and insurable health • Private sector solution