Livens & Reed, PLLC

Rival interests highlight importance of long-term care planning

There appears to be a competition between retirement planning and the need for long-term care funding. Add to that, the view shared by many observers in Texas and nationwide that Americans are in denial about the prospective need for long-term care, and a real problem seems to be emerging. The picture is not made brighter by the projected inability of Medicare and other government sources to fund the costs of long-term care into the future.

Originally, long-term care was to be covered for all Americans under the Affordable Care Act. However, the political forces wore that idea down, and the funding to do it did not materialize. It was decided to let the Centers for Medicare & Medicaid Services maintain the responsibility. In addition, private insurers have come up with a proposal that calls for 401(k) withdrawals to be tax-free if used for long-term care insurance premiums.

However, they point out that the IRS has treated long-term care insurance unsympathetically in the past, and the cooperation of the tax agency will be necessary. There is, at the same time, a claims crisis among long-term care insurers. They have reportedly paid out substantial claims, necessitating increased premiums. Thus, more policies need to be purchased to put this line of coverage back on track.

Perhaps, what is ultimately needed is a revised interest by aging Americans. The Boomers still feel too invincible to think about the prospects of total disability and a dreaded lack of mobility. Being confined to home or a nursing home seems to be a passing thought only.

If you are a Texas resident who would like to resolve these issues for your own peace of mind, you will likely benefit from a consultation with an elder law attorney and/or a financial planner focusing on elder law issues. It is wise to remember that long-term care planning is a family matter. Many families would be well-served to make it a point over the coming weeks to at least set up a family meeting at which these concerns can be discussed.

Source:, "401(k) Withdrawals Could Keep Tax-Free Status When Used to Pay Long-Term Care", Juliette Fairley, Dec. 1, 2014

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