The Role of Long Term Care Insurance in Legacy Planning

April 13, 2012
Parsippany, NJ

During our working years, it's easy to approach retirement planning with a focus solely on finances. We ask, "How much money will we need to retire?" We assume future interest rates and even our projected lifespan in an effort to nail down the financials of retirement.

However, as we age, at some point it's not unusual for our thoughts on retirement planning to expand well beyond the dollars we'll need personally. We ponder bigger questions. One of those bigger questions is that of legacy. In the financial planning world, the word legacy is frequently used synonymously with the word inheritance. Legacy, however, means so much more!

There are many different kinds of legacy. Beyond the money you may bequest, do you want to leave a legacy of caring? Of love? Family values? Responsibility?

It's important to recognize that legacy planning, if it's done without long term care planning, can be such a serious omission that it undermines the goals of the planning itself. Indeed, although many people pre-plan and pre-fund funeral and burial services to ease the burden on those left behind, far fewer pre-plan and pre-fund the possibility of needing long term care. How does this impact legacy, especially if the need for care is prolonged, and the goodbye is long? Although the answer can be different for each individual, here are some important factors to consider:

- The existence of pre-planned and pre-funded long term care can be a huge relief for family members when a crisis hits and family members are trying to figure out how to pay for care.

- LTC planning can help avert family disharmony: the wishes of the person needing care are known, so that instead of scrambling around in a crisis, loved ones have direction, which helps to minimize any potential conflict.

- To the extent funding is in place to hire professional help, the burden of caregiving is lifted from family members' shoulders. They enjoy the ability to purchase professional services to supplement or even replace their caregiving. The focus of their visits can then become relationship-building and affirming, instead of caregiving.

- When long term care expenses are planned for in advance through the purchase of long term care insurance, personal funds can be the backup, not the primary means to fund care. Therefore, long term care insurance proceeds have the ability to preserve inheritances, when policy benefits are adequate to cover care expenses.

- The presence of long term care insurance can free family members from having to make "Sophie's Choice" decisions, such as whether to decline to use needed professional care in an effort to save money for a spouse or inheritance.

Effective retirement and legacy planning needn't dominate our thoughts, making us paranoid and feeling vulnerable. Instead, we can choose to stare the topics down and proactively make some tough and important decisions. One of these decisions is the purchase of long term care insurance. The purchase of a long term care insurance policy can not only preserve our financial bequests, but can result in an enhanced non-financial legacy to our heirs.