Is a long term care policy worth it

Attorney Tom Olsen: Robert, I had some clients in last week and they were telling me that they had a long-term care policy. I could tell by the way they said that they were thinking, "Oh, well, we're good. We're golden. We've got a long-term care policy." I was telling them that they are not all what they are cracked up to be.

Attorney Robert Hidock: No, they're not. I actually had a client this week that emailed me his policy. Some of these policies, this guy, he's retired but he's working to pay for the premium of his long-term policy which is $525 a month. Long-term policies can be good if you're at home and you can get home healthcare. The problem becomes if you have to go into a skilled nursing facility, you have paid years and years and years for this policy only for it to have to go into a nursing home because there's not one long-term care policy that will actually pay for a private paid skilled nursing facility because that's $12,000 a month.

Most long-term care policies are a $100 a day or $200 a day, and so the problem is, Tom, you've got this guy, someone that's paid a lot of money, and there would otherwise be under-income, but this person's long-term care policy was an income policy. Then that income is added onto his regular income, so then he needs a QIT to qualify for Medicaid because he's over-income. Then all that money, almost $7,000 a month, goes right to the nursing home.

Tom: Well Robert, that's what I'm thinking, is that these long-term care policies have given people a false sense of security that it's not going to do what they hope it's going to do. You told me the premium was $500 a month. I've heard of people paying a lot more than that per month for a premium.

Robert: For the--"

Sam: For the long-term care policy.

Robert: Yes. This was just the one that I happened to look at. In my own world, with my mom, she had a long-term care policy. After I looked at it and I had our Medicaid expert look at it, it was advised that we not carry those payments because they were starting to be a lot of money. The good news is the money that she paid into it, she can still get that back in long-term care. It is not like it's totally thrown down the drain. She still has that income, that potential income.

Tom: Well, the bottom line is with the planning that we can do here at the Olsen Law Group, they don't need a long-term care policy, because we have the ability to protect all of their assets from the cost of a nursing home. That's going to be their home and IRAs and money in the bank as well.

Robert: Yes, and there's not- Knock on wood. -there hasn't been one asset that we haven't been able to protect. I would much prefer a client who's aging who's spending a $500 or $750 a month for this policy. That money could probably be better spent elsewhere. I don't often think it's the ultimate disrespect. You've paid so much money. Only when you're in crisis and you need help that the money, it's going to go to a nursing home, so you waste-- Where if you didn't have it, you still would be going to a nursing home, and you wouldn't have to spend all that extra money.

Tom: If there's a listener right now out there that says, "Hey, I've got a long-term care policy," and they're probably just like me. You could pick up that policy and not understand a word about what it says. Would they be able to send it to you for a review?

Robert: Yes, they could certainly email it to me. With Medicaid, there's two types of long-term care policies. One is Medicaid will determine as income, which means that, yes, it will be considered income for a qualified income trust. If you go on Medicaid, it gets computed with your monthly income, would have to go into a qualified income trust and then pay a nursing home. The other type of policy is a reimbursement policy where it pays up to a specific amount every single month. That, actually, the long-term care policy issuers, they will pay the nursing home directly, so you won't even see that money.

Tom: Got it.

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