How Long-Term Care Insurance Works: Costs, Coverage, and Options for Expats

Once you turn 65, you have roughly a 50/50 chance of needing extended care at some point. This episode breaks down what long term care insurance covers, what it costs, and how to structure it properly, especially for expats who may end up using benefits outside the US. This episode offers practical financial advice for expats and advice for immigrants trying to plan care decisions across two countries.

Richard Taylor, Chartered Financial Planner and founder of Plan First Wealth, is joined by returning guest Mark Maurer, President and CEO of LLIS, to explain the IRS triggers that qualify someone for long term care benefits and why average claim durations (around 2.5 years for men, 3.5-4 years for women) are far shorter than the worst-case scenarios people fear. As a British expat who built his practice around expat retirement planning, Richard frames the whole conversation through the lens of clients living abroad.

Richard and Mark walk through the three main ways to fund long term care: traditional standalone policies, permanent life insurance with a long term care rider and annuities with a long term care rider. They cover the real differences in premium structure, death benefits, tax treatment of benefits, underwriting requirements, and how 1035 exchanges can move an old annuity with deferred gains into a long term care policy tax-free.

They also discuss what happens to coverage if you move abroad. How international benefit provisions vary by carrier, why some policies cap overseas benefits at two years before requiring a return to the US, and what to check before relying on a policy while living outside the country. For anyone moving to the US or moving to America later in life, this is exactly the kind of detail that gets overlooked.

Whether you’re 55 and starting to plan, caring for an aging parent, or advising clients with cross-border retirement assets, this episode covers the mechanics of long term care insurance in detail, not just the broad strokes. It fits into cross border financial planning for anyone managing international wealth across the UK and US.

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Expat Wealth is supported by Plan First Wealth. Plan First Wealth is a Registered Investment Advisor serving fellow expatriates and immigrants living across the US on matters such as retirement planning, investment management, tax planning and non-US asset management.

https://planfirstwealth.com/

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Expat Wealth is affiliated with Plan First Wealth LLC, an SEC registered investment advisor. The views and opinions expressed in this program are those of the speakers and do not necessarily reflect the views or positions of Plan First Wealth.

Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Plan First Wealth does not provide any tax and/or legal advice and strongly recommends that listeners seek their own advice in these areas.

ABOUT RICHARD:

Richard Taylor is a British expat, dual citizen (UK & US). Originally from Bolton, he now lives in Greenwich, CT, where Plan First Wealth has its head office.

As the firm’s leader, Richard launched Taylor & Taylor, now Plan First Wealth, and continues to fuel the firm’s growth. Richard is a Chartered Financial Planner (UK – CII) in addition to holding the IMC (CFA UK) and Series 65 (US – FINRA).

Connect with Richard on LinkedIn

 

TRANSCRIPT:

Mark Maurer: [00:00:00 – 00:00:09]

Once you get to age 65, you’ve got a 50, 50 chance that you’re going to need some type of care for an extended period during, during your lifetime. 

 

Richard Taylor: [00:00:09 – 00:00:13]

We’re living longer and longer and longer, but our health funds aren’t necessarily keeping up really. 

 

Mark Maurer: [00:00:13 – 00:00:19]

It’s a, a pool of money you can draw down on every month to pay for care. 

 

Richard Taylor: [00:00:19 – 00:02:33]

I think what scares most people is this, this, the unknown and the, and the concern that like they go into care at 80 or their partner goes into care at 80 and they live till 100, you know, 20 years of, I mean, tens of thousands of dollars a year on care fees. Welcome to Expat Wealth, a Plan first wealth podcast dedicated to helping ambitious expatriates in America and Americans overseas thrive. I’m your host Richard Taylor and Plan first wealth is the business I founded and run today. And we work with successful expatriates and immigrants and internationally minded Americans to make the most of their opportunity and avoid the expat landmines. First, a quick disclaimer. While Plan First Wealth LLC is an SEC registered investment Advisor, the views and opinions expressed in this program are those of the speakers and do not necessarily reflect the views and positions of Plan First Wealth. Information presented is for educational purposes only. Now, if you aren’t already receiving our emails, please go to our website, www.planfirstwealth.com and sign up there in. It’s free and you’ll be notified every time we drop a new episode and so much more. Okay, let’s get back to this week’s show. Welcome to our Ask an expert show where I invite a fellow professional to come in and talk to us about important issues expats need to be thinking about. My guest today is Mark Maurer. Mark is the President and CEO of llis. LLIS is an insurance broker who only work through fee only financial advisors such as Plan First Wealth. This is Mark’s second appearance on the podcast. On his first visit, we got into all things insurance and annuities. And if you haven’t listened to that, I encourage you to go back and give it a listen. That’s episode 61. But today we’re going to focus purely on long term care insurance. Now, for obvious reasons, we are living longer, much longer. But our bodies and minds unfortunately aren’t always keeping up. The cost of care can be astronomical and people are understandably worried about them and their loved ones being cared for and comfortable, but also trying not to get wiped out financially along the way. So without further ado, let’s get into this. Hi Mark. Welcome back to Expat Wealth. 

 

Mark Maurer: [00:02:33 – 00:02:39]

Richard, thank you for having me back. I must have, I must have been okay or else you wouldn’t have me back. So. 

 

Richard Taylor: [00:02:39 – 00:02:41]

Yeah, you passed the audition. Well done. 

 

Mark Maurer: [00:02:41 – 00:02:41]

Yeah. 

 

Richard Taylor: [00:02:41 – 00:03:03]

Okay. Well we, that was that, yeah we, I think cast my mind back. That was a far reaching conversation we had about all things and u’s and insurance and yeah we got, we couldn’t get too specific into anything although we, we, we did our well for anyone who hasn’t given that episode a lesson. Mark, will you just quickly introduce yourself and llis. 

 

Mark Maurer: [00:03:03 – 00:03:38]

Sure, sure. And you did a good job. I’m Mark Maurer. We’re in Tampa, Florida and we work with, we’re an insurance office that works just with fee only financial advisors. And I’ve been doing it almost 23 years now. 23 In July. So it’s hard, hard to believe I’ve been doing it that long. And it’s just a great group of work with advisors who, who are looking to do the best for their clients. And yeah, we, we really enjoy working with, with all of them. 

 

Richard Taylor: [00:03:38 – 00:04:28]

Good, good. Okay. Right. Well so we’re going to, we want, I want to get back in because I’m seeing it in the media more and more but also more and more with our clients. Our, more and more of our clients are retiring. More of our clients are starting to think about this long term care conundrum. I do think it is a conundrum because it’s kind of like this. It’s a bit like when we start when we model out healthcare expenses that you know, you can, they can get pretty ridiculous pretty quickly. So we’re going to talk about if someone does choose to ensure that away, what are the options? But just before we even get there, I guess let’s try and let’s have just a conversation about long term, the need for long term care. You know, whether it’s insurance or having a plan like how, how bad does it get here? 

 

Mark Maurer: [00:04:29 – 00:05:44]

You touched on a handful of things there and just the idea of planning is, you know, who we all, I think the last statistics I see say once you get to age 65, you’ve got a 50, 50 chance that you’re going to need some type of care for an extended period during, during your lifetime. So when we talk about long term care, what are we really talking about? And what I tell people is your traditional health insurance is designed kind of to treat something and fix something. You know, you take a cholesterol medication and it gets your Cholesterol low. Okay, we fix it. You have a heart attack and need a stent put in. That’s a surgery and it’s designed to fix long term care. Is this kind of other part where it’s a chronic sort of condition or conditions where you’re not able to either perform two of the six activities of daily living, which are. And I had to put it up on my other screen because I can always remember five, not all six, bathing, dressing, toileting, transferring continence and feeding. So things where you’re still around, you just may not be able to do these, these activities of daily living every day. 

 

Richard Taylor: [00:05:44 – 00:05:54]

Wait, so is it when you can’t do. Is it when you can’t do two of them? Two out of those six and that and that. And what does that, that qualify? That cause you just needing long term care or. 

 

Mark Maurer: [00:05:54 – 00:06:53]

Right. So then that’s, that’s sort of the IRS definition or how you would be able to access benefits through a policy. The other is some sort of cognitive impairment. And I think we’re all familiar with something like that, Alzheimer’s dementia, where that person, and my grandmother is a good example. She could do every one of those. Bathing, dressing, toileting, you know, she was perfectly fine. She just. My grandfather had to be around because she might forget to turn off the stove and they have a gas stove. Some of those things where the physical functioning is fine, the mental capacity just isn’t there anymore. So those are what they call triggers. So those are the triggers that someone can qualify for, for benefits through a long term care policy. So at least when I talk about long term care, that’s sort of the higher level. It’s not. Dad’s getting kind of old and you know, maybe we shouldn’t let him drive anymore. 

 

Richard Taylor: [00:06:53 – 00:07:39]

No, it’s, it’s like, yeah, it’s, it’s. Medical is the wrong word, but it kind of, it’s like a. Yeah, it’s, it’s more, it’s more serious than just a lack of aging mobility, really. It’s, it’s. Yeah. And we’re getting, as I said in the intro, we are getting. We’re living longer and longer and longer, but our health spawns aren’t necessarily keeping up. And it’s not you. As your grandmother suffered with Alzheimer’s, so did mine. And that was prolonged, I think about when she was diagnosed and when she ended up going into a home. And then when she ended up passing away, there were many, many years, many, many years past. So these are things that could go on for decades presumably, yeah. 

 

Mark Maurer: [00:07:39 – 00:07:55]

And there’s again, the numbers are showing that men tend to use care on average. And on average it can be a really dangerous number. But on average two years, two and a half years for men and women tend to be about three and a half to four years. 

 

Richard Taylor: [00:07:55 – 00:08:26]

Mark, just what you’re saying there is it just so I understand it, so I just said this can go on for decades. Right, but what you’re saying is when people access long term care help, right, when they go into, when they go into a care home of some facility, right, Whether for physical ailments or mental ailments, you from entering to, I guess, I guess we’re talking about dying, right? From entering to dying for men is two and a half years on average for women is three and a half years. Right. 

 

Mark Maurer: [00:08:26 – 00:09:11]

And a big part of that is. And again, using my, you know, my family as an example, my grandfather took care of my grandmother for many, many years. You know, he did the care basically the care providing that a long term care policy would do till it got to a point where he couldn’t do it himself. And so single people probably need a long term care policy or long term care care plan more than a couple because again, I’m, you know, I’m, I’m much bigger than my wife, so she probably couldn’t pick me up, but if I needed care, she would be around to probably do a lot of it and might need, you know, just a little bit of care to help with me. 

 

Richard Taylor: [00:09:11 – 00:09:21]

Well, that would, that would, would that sort of thing be covered with that would, that would, would, would partial help be covered under these plans or, or is it all or nothing? 

 

Mark Maurer: [00:09:21 – 00:10:57]

Yes, great, great question. And it depends on the type of plan. Some plans are what’s called a reimbursement plan. So if you need, once you qualify as needing care and you can say I need somebody to come in two hours a day, a home health person, two hours a day, because that’s what my wife needs to help care for me, then that policy will reimburse whatever that might be, $100 each day for that, for that person to come in. Other plans are what’s called an indemnity benefit. So if I need care at any point in the month, the policy is just going to pay the full daily benefit or the full monthly benefit, assuming that throughout the course of the month I’m going to, my family is going to use some amount of coverage. So it really depends on the type of plan whether you get reimbursed for care you paid for or you get sort of just your monthly or daily check. But yes, in some scenarios it depends on how much coverage or how much you work with a care provider, you work with a home health care provider, somebody to figure out, they call it a plan of care to see what somebody needs and how much and sort of what level of qualifications you need to have somebody coming in a home health care person isn’t going to be usually as, you know, qualified to do medical things as you would and you know, a nurse, depending on what somebody needs. 

 

Richard Taylor: [00:10:58 – 00:11:15]

I think what scares most people is this, this the unknown and the, and the concern that like they go into care at 80 or their partner goes to care at 80 and they live till 100, you know, 20 years of, I mean, tens of thousands of dollars a year on care fees. 

 

Mark Maurer: [00:11:15 – 00:11:16]

Right. 

 

Richard Taylor: [00:11:17 – 00:11:36]

What you’ve said though is that on average, the average suggests that’s not the case at all. The average, generally it’s much, much shorter, but presumably those kind of that, that 10, 20 years in care, that risk does that risk. Is that, is that a reality and is there a way to mitigate that? 

 

Mark Maurer: [00:11:36 – 00:12:31]

If you imagine and you know, a lot of people are going to need, at the point where you generally need long term care, things aren’t going well necessarily health wise. So you have probably the majority of people who once they start to need care may not make it six months or a year. So that’s a really big percentage over here. So the problem with that is that you have many more people who might use care for a year and then pass away. Fewer people are going to use it for two years and then pass away. Fewer and fewer are going to use it for three years and pass away. So yes, you’re going to have this person who might need it 10, 15 years, maybe they have Alzheimer’s and they’re single, there’s no one to care for them. But that’s one person out of, compared to, you know, hundreds of people who used it one, two, three years. So that really skews the average. 

 

Richard Taylor: [00:12:31 – 00:12:47]

So yes, that’s a risk. Yes, that could happen. But the reality of it is that would be extremely unusual and you’re far more likely to fit into the other category where you or your partner needs it for a much, much shorter period of time. 

 

Mark Maurer: [00:12:47 – 00:14:41]

And that’s, and that’s part of when, you know, when we’re looking at helping design policies, I tend to look at what’s sort of that average, knowing that most people also have, I have some other assets over here that, that I could use for Care. I have other places and pots of money. So what is a, you know, something that most of us, you’re right. If somebody says I had longevity in my family, both of my parents or my grandparents needed care for 10 years, then you might say let’s look at a policy maybe that has a six year benefit period or something longer. But most of us, again using my example, my grandmother had, had Alzheimer’s, but she didn’t live an inordinately long time because with some of that, sometimes your health just starts to fade too. So when we start looking at years of benefits, three years of benefits can cover quite a bit. And then if we cover spouses and I might be jumping ahead, but you can get policies that say I’ll use my wife Leah and myself. Mark has three years of benefits, Leah has three years benef. But we add this shared care writer. So let’s say Leah goes on claim first and needs four years of benefits. She has her three years, she is up and then can jump over to Mark’s got it. So, so we end up with kind of this even bigger really it’s a pool of money that we think about and I don’t know how to sort of undo it in people’s minds, but we talk about it in years because I think we can all intuit that a little bit more. But really it’s a, a pool of money you can draw down on every month to pay for care. But I think for most people to say it’s a, this is a $220,000 long term care pool. 

 

Richard Taylor: [00:14:42 – 00:14:44]

Okay, yeah, yeah, put it into year. 

 

Mark Maurer: [00:14:44 – 00:14:48]

Yeah, but we put it in years. It’s a three year benefit period. Yeah, that I can understand. 

 

Richard Taylor: [00:14:49 – 00:15:49]

All right, look, we’re itching to go there, so let’s go, let’s get specific. So you’re the master here. I’m just following along so hopefully I can ask some, some, some useful questions for our listeners. But broadly, as far as I’m aware, and you correct me if I’m wrong here, there’s, you’ve got, if you’re going to insure it, you’ve got three options. You’ve got straight up insurance which people will be familiar with, like your car insurance, your auto, your home insurance, you pay an insurer some money every single year. And then if you ever need long term care, they cover some or hopefully all of it. That’s, that’s the first one. Second one would be then permanent life insurance with a rider. So permanent life insurance for folks is like a whole of life insurance or variable life insurance, I guess. And this is, these are, these are where you can also build up a pot of cash alongside it, I guess. And, but anyway, you can tell. And then the third one would be an annuity with a rider and I’m totally out my depth on that one. So tell us about these different options and, and who they’re appropriate for and when they work and when they don’t work. 

 

Mark Maurer: [00:15:51 – 00:17:29]

And you did a great job. So the first way that traditional long term care policy, you do exactly what I like to explain. It’s like our homeowners, our car insurance, our health insurance. We pay this premium every month, every year for this coverage if we ever need it. Kind of like I really hope my house doesn’t burn down, I hope I don’t get in a car accident. I hope this is something I pay for that I never have to use, but if I do, it’s there. And again, you can have, you sort of design a policy with the number of years that you want to have the benefits, be able to be around for a monthly amount. There’s, and that’s another thing with long term care, you sort of pick the amount. So you, with more traditional health insurance, you just have a policy and I think there’s some limit somewhere in there, but most of us don’t know what it is. You go into the doctor and you know, you give them the insurance and you pay your $25 copay. And it all kind of works itself out with long term care because the costs are based on where you receive care. And so Tampa might be a lot different than upstate New York, which might also be a lot different than rural Kentucky. So you sort of price your policy and you look at costs of care in the area where somebody might receive care to figure out how much you need. So we sort of design all of those things within a policy and then it’s there. It’s there if you need it. If I never needed it, well, it was sort of something I spent on. 

 

Richard Taylor: [00:17:30 – 00:17:47]

So super straightforward. What I’ve heard with these though is that the, that the, every year at renewal these can go up catastrophically high, making them just almost unfeasible. Is that, is that accurate? 

 

Mark Maurer: [00:17:47 – 00:19:30]

So yes. And that’s why sort of the other policies, the life insurance and the annuities with long term care rides have all kind of surged in popularity compared to long term care. Real quick, long term care policies came out in the 1980s. Insurance companies didn’t really know what they were doing because it was brand new assisted Living facilities. What’s that? They had a lot of, they made a lot of assumptions that were sort of the opposite of what happened. They assumed that they were going to earn. For anybody who’s been in the 80s, I remember my dad telling me, like, I think when they bought their house in Tampa in the 80s, I think it was like a 13.5% adjustable rate mortgage. And they were pretty excited about that. In the 80s interest rates, they assumed a certain interest rate assumption. Well, we’ve had up until a few years ago historically low interest rates for a long time. So they built in assumptions on what they were going to earn for interest. They built in assumptions on how long people were going to use the policies and how long to need them. And they really didn’t know because it was a new type of policy that had never been tracked before. And the other thing is they thought people were going to change their policies. Probably. Anybody listening? You probably don’t have the same home insurance company or the same auto company that you did five years ago. You know, we all sort of switch here and there and insurance companies kind of thought people were going to do that with their long term care. But once you got these, they were so good that people never changed. 

 

Richard Taylor: [00:19:30 – 00:19:38]

That’s interesting because I kind of think of long term care insurance. I think of it like my life insurance, you know, once I got my life insurance, I ain’t changing that. 

 

Mark Maurer: [00:19:39 – 00:19:53]

But even historically, a lot of people still do change life insurance or they drop it. A lot of people will get whole life policies initially and then start working and go, well, I don’t really need this anymore. And I can’t remember why I had. 

 

Richard Taylor: [00:19:53 – 00:19:56]

It because they were sold it. But we’re not going there. 

 

Mark Maurer: [00:19:56 – 00:20:00]

We did not see previous podcast, see previous podcasts. 

 

Richard Taylor: [00:20:00 – 00:20:01]

Exactly. 

 

Mark Maurer: [00:20:02 – 00:21:18]

And so all of these assumptions led to really underpricing. And so I, I tell this story. It’s, it’s the opposite. So when I got married in 1999, my four best friends went in on a present all together for us when we got married. It was a single disc DVD player. Four people thought it was really cool to go in and get a single disc. I mean the thing was this big. I think it came with four free DVDs that I’ve never watched. And today you can get a DVD player that’s this big with Blu Ray and it’s got Internet for like $35. Long term care is sort of the opposite of this. It was really low priced, fairly low really, we might say. And historically in hindsight, too low and no insurance company really wanted to be the first to raise rates. And so it ended up being like the boy with a finger in the dam that eventually when it happened, the insurance companies have to go to the states and request a rate increase. But it had been a while since anybody had done anything, so they started to request rates of 15, 20, 30%. Sometimes I’ve seen as high as 40% over three or four years. 

 

Richard Taylor: [00:21:18 – 00:21:19]

Wow. 

 

Mark Maurer: [00:21:19 – 00:21:55]

Yes, a 40% rate increase stinks. However, when I do a policy review about long term care and somebody’s policy went from $1000 to $1400 a year, but when I can say now that you’re 78 and you wanted to get similar benefits, it would cost you $18,000 a year, that’s, that’s exaggeration. $7,000 A year based on your current age and all these benefits. The, the increase stinks, but you’re still paying way below market rates for those policies. 

 

Richard Taylor: [00:21:55 – 00:22:17]

So it’s a, so it sounds like it’s still a great deal for those people who got in the 80s and maybe 90s, but for, for someone taking out today, now that the, the insurance companies have got wind, does it, does it, let’s say, get got wind now they’ve, now, now they’re, they can be more realistic perhaps with their pricing. Is there any scenario where just straight up insurance works or is it always going to be savagely expensive? 

 

Mark Maurer: [00:22:17 – 00:22:40]

No. And the good news is now, while it may cost more than what somebody would have paid for the same coverage five years ago, we have much more claims experience, lower interest rate assumptions. So the chances of those rate increases are much lower for policies today because we have a lot more data behind them. 

 

Richard Taylor: [00:22:41 – 00:23:04]

But you do always have that hanging over you. That’s always. There is something about, I’m guessing there’s more certainty with the other two. Like you put a certain amount of money and you know that. Whereas with this it sounds like, yeah, okay, great, we’ve learned a lot and interest rates are lower, but there’s always that threat hanging over you that you could have this policy for what, 10, 15, 20 years and then suddenly the rate starts to shift and you’re left holding the baby. 

 

Mark Maurer: [00:23:05 – 00:24:00]

And yeah, and so, so for the trade off compared to the other two, it’s going to have the lowest premium, it’s going to have the lowest cost because we’re not adding on annuity cash values, we’re not adding on a death benefit. So it’s great for people maybe who have a lot of pension income, you know, a lot of a lot of income in retirement. Maybe I don’t have a lot of extra assets to allocate towards something like an annuity that’s going to be a single premium type design. But I’ve got a really good income flow and so, so this over here, these long term care premiums are easily or more easily absorbed through all of my income Rather than trying to take money from either other assets to write a big check for an annuity with long term care writer or a life insurance policy that has that long term care coverage. 

 

Richard Taylor: [00:24:00 – 00:24:27]

Oh, that’s super interesting. I hadn’t thought that. So you’ve got the lowest premium but you’re paying the premium essentially forever as long as you keep the policy. And whereas the others which we’re going to get to in a minute, they require either like a lump sum or like front loading contributions for a number of years. So basically you’re putting capital in either in one go or over 10 pays or something like that. And for people who haven’t got that, this is probably going to be the most effective option for them. 

 

Mark Maurer: [00:24:27 – 00:24:29]

Right, great. 

 

Richard Taylor: [00:24:29 – 00:24:31]

Anything else on straight up insurance? 

 

Mark Maurer: [00:24:31 – 00:25:30]

No, I think that one’s good. So then we’ll jump into life. Yeah, let’s go life and long term care. And so as you sort of teed me up on that. So that’s one of the things that I think insurance companies and the world realized no one’s a big fan of these increased premiums and people might be able and willing to pay a little more now to say that’s not going to happen later in the future. So a lot of the, the life insurance with long term care benefits, Lincoln’s moneyguard is, is probably the original and so it’s designed usually for what I call a short pay. So if you’re 55, you might be able to pay anywhere between a single premium and 10 years. Most of them you can’t pay to age 100 like you could a traditional long term care policy. So you’re right, you’re sort of front loading my number of premiums. 

 

Richard Taylor: [00:25:31 – 00:25:44]

Mark, can I just jump in a second? You’ve just triggered a question I should have asked a minute ago. Is there, when should people be thinking about long term care insurance and is there an age where you’ve just missed the boat and really you’ve essentially chosen to self insure? 

 

Mark Maurer: [00:25:44 – 00:27:00]

Yes. So usually by the time you get to your mid-70s, insurance companies stop offering coverage. Okay, that’s still not ideal. It’s going to be pricey. Then what I tell people is there’s probably two. I’d say right around mid-50s going to be the ideal time to start thinking about it. Before that, and I’m not quite in my mid-50s, but before that we’ve got kids and we’re worried about saving for college and paying down our mortgage and see previous podcasts. I need term insurance in case I die. I need disability coverage in case I can’t work. So I’m kind of full with my insurance and where my money kind of is going on the outside. And so somewhere right around 55 and I’m not there yet, getting closer every day we get sort of to this, this point in time where we say, okay, I’ve, I’ve worked, I’ve saved, I’ve got some stuff built up, I need more stuff to get built up. But, but now I’m starting to see where I can actually, in my mindset, see where I’m. At some point I’m going to start spending down on some of this and how do I protect what I’ve got spent down? 

 

Richard Taylor: [00:27:00 – 00:27:13]

Maybe that, maybe that, that, you know, that, that couple of hundred dollars and the couple, maybe even thousand, whatever a month that was going into the 529 plans and the term insurance, you know, that gets really allocated out to something like this. 

 

Mark Maurer: [00:27:13 – 00:28:51]

Okay, exactly. Yes. And then the other thing that happens usually right around mid-50s, is we start to see it personally when I’m 30 and my parents are 60 and you know, kicking it and doing all kinds of awesome things, long term care, you know, it’s, I’m not even thinking about it. You hit mid 50, you know, you hit 55. And it’s very likely that we have a parent who’s started to need some care, an aunt or an uncle or, you know, now it’s not a thing that happens to people way out there. It’s, oh, this is happening to my mom. So now all of a sudden it becomes real to me, both of those things. Our kids start to leave the house. We’re reallocating 529 plan contributions. We start to see it with a parent kind of this mid-50s is sort of the ideal time. And then pulling back just a little bit. It’s also really cool when we start talking about those lifelong term care policies. I’m 55, I’m going to work another 10 years. Let’s get this policy paid off while I have income coming in. So that, and that’s something else that long term care can be a, it’s a couple hundred dollars a month expense with A traditional long term care policy, it’s going on indefinitely. If I have the wherewithal, let’s pay this off in the next 10 years with a lifelong term care policy. Get this paid off in 10 years so that when you get to retirement this isn’t another expense that I have to budget for every month. 

 

Richard Taylor: [00:28:51 – 00:29:05]

And Mark, so I know you said insurance companies stop accepting people mid to late 70s. If we say 55 is kind of like the sweet spot, when is it Realistically it’s just prohibitively expensive in General, is it 65? 

 

Mark Maurer: [00:29:06 – 00:29:37]

70 I would say, I would say probably even through late 60s is still going to be reasonable. 70 And it looks kind of like a hockey stick. 55 To 56 to 65, it’s all going to go up and then right. Usually somewhere around 67, 68 it starts to really go up. So yes, once you get to probably 70, just the costs start to get just pretty high. 

 

Richard Taylor: [00:29:37 – 00:31:13]

I’m excited to announce that Expat wealth has its first sponsor, the Global Financial Planning Institute. The GFPI exists to provide education, community tools, resources and ongoing research for financial planners and other advanced financial professionals working with international and cross border clients in the US And Americans abroad. I’m a GFP Institute fellow and I’ve put all our employees through their GFPI programs when they join us. I’ve met some great people. I’ve learned a ton. It’s a genuine community of internationally minded folk doing their best to serve their clients properly and critically sharing what they know in the oftentimes challenging and ambiguous US cross border environment. And as anyone in this sector will tell you, you’re always learning. So if you work with international clients and or Americans abroad or if this is an area you’re looking to get into, check out the gfpi@www.gfp.in stute you will be glad you did and I hope to see you there soon. Back to we were talking whole life or permanent life insurance with a rider. Lincoln moneyguard is the famous one that I’ve heard of and you mentioned a single pay or up to 10 pay. And can you, can you choose, can you do a 5 pay if you want to or is it okay right. So and what just what I’m talking about there people is you can like let’s say you can fund it with say $200,000 or you can split that $200,000 up over 10 years. Is that or five years or okay, so 20, 20 grand a year for 10 years or 40 grand a year for five years. And then what happens with that money? What, what happens? That part. 

 

Mark Maurer: [00:31:13 – 00:32:48]

Well, and, and the cool thing about this, and this is really where with the long term care and the rate increases, I think that’s where it came up. So using, using your number, I put in $200,000. This policy is going to have this long term care benefits if I ever need it. It’s going to have a cash value if for whatever reason I get into really bad shape and I need to cash this in now. We certainly hope you don’t. And I think it’s the last place anybody should take money from. But there’s that cash value as a 76 backup plan or let’s say I don’t ever use it for care. It has a, let’s say $300,000 death benefit that goes to my spouse, my kids and the rates are guaranteed. So I’m never going to have premiums come back. I know exactly what the benefits are going to be each year. So the, adding it, adding the long term care benefits to this life insurance component does two things I think that really interested people. One is I’m not going to have rate increases, my benefits aren’t going to go down later or I don’t have to have new premiums coming in anywhere. And it solves that like our homeowners and our auto insurance, I pay for it but if I never need it, it’s, it’s just kind of gone. This says I put the money in and if I need care, great, I’ve got this long term care pool. If I don’t, well, the 200 I put in is now a $300,000 death benefit to my kids. 

 

Richard Taylor: [00:32:48 – 00:33:17]

Right. So obviously the case against would be like yeah, but if you’d put $200,000 into the market by the time you die it should be worth an awful lot more than 300 grand. Yes, great. But you know, big but is you’ve also got this, you’re also paying for insurance, long term care insurance. So let me just get, I get this straight. So I’m 55, I do it a $200,000 policy and, and do I pick the amount or do the insurance companies pick. 

 

Mark Maurer: [00:33:17 – 00:33:18]

Yes. 

 

Richard Taylor: [00:33:18 – 00:33:42]

So I pick the premium and then they pick how much cover that they’ll do a underwriting and that’ll tell me how much a long term care I’m going to get for that. So I, I put my 200000 in either in one go or 20 grand a year for, for 10 years and I’ve got a cash, I’ve got a cash value. So should I need it in desperate, desperate situation, presumably that cash value is gonna be a lot less than the 200,000 that I put in. 

 

Mark Maurer: [00:33:42 – 00:33:48]

Though usually most plans have something that’s like an 80% return of premium. 

 

Richard Taylor: [00:33:48 – 00:34:19]

80% Return of premium. Okay, great. So I’ve put my hundred, I’ve put my 200 grand in. The plan is never to touch it. But if dire situation mean I had to, there might be 160 grand there cash that I could take out. But let’s hope I never have to. If I get sick and need long term care, I, I’ve got a long term care, a long term care component and it’ll cover me for whatever we agree, like three, four years, however long that was, how much cover I was able to purchase at the time. 

 

Mark Maurer: [00:34:19 – 00:34:37]

Yeah. And if, yeah. If you go on claim at like age 85 and using our 200,000 premium and $300,000 benefit at age 85, it might be 800 $900,000 of long term care. So it’s a really, if you need care, it’s a really big pool of money by that point. 

 

Richard Taylor: [00:34:38 – 00:34:50]

Wow. And then if I don’t use it, my estate will still benefit, my heirs will still benefit from say 300,000 in death benefits. That does seem like a really good option. 

 

Mark Maurer: [00:34:51 – 00:35:21]

I agree. And the even cooler thing is there’s a nationwide came out with a joint policy. So you can actually have two people on one policy and it ends up being a second to die life insurance policy with long term care benefits that a couple can share and do the same thing. Short pay, 10 pay. And that’s actually what, what my wife and I did for our, our planning with long term care is one of those joint, joint policies with the long term care. 

 

Richard Taylor: [00:35:21 – 00:35:31]

Wow. And you know we talked before about reimbursement and identified. So reimbursement might cover you if you just, if you needed home help, would that, would these kind of policies help with that or. 

 

Mark Maurer: [00:35:31 – 00:36:17]

Yeah. So with, with the, and the usual word is the tax qualified. So all these plans are going to be tax qualified under the IRS rules. And it says you can, you can get benefits for care at home, adult daycare, assisted living facilities or full skilled nursing home care. So all you’re eligible to receive care in all of those eligible to receive care and receive reimbursement or payments for care in all of those places. The exception that, that a lot of people ask is, you know, can I pay my, my husband to pay for care? No, it’s, it’s Got to be somebody licensed because we can all imagine how, how that can go wrong. 

 

Richard Taylor: [00:36:18 – 00:36:31]

Yes. Yeah, that would be horribly abused. Be horribly abused. Ruin it for all the rest of us. Okay, well that’s certainly very interesting. Is there anything else we should mention on these policies, these plans? 

 

Mark Maurer: [00:36:31 – 00:38:24]

No, I don’t think so. I really like them. And then we’ll talk about the annuity. But there’s also kind of the spectrum of premium payments. So you have your traditional long term care is going to have the lowest annual premium because we’re paying until either I die or until I go on claim the life insurance. We can do a single pay, but we have the ability to do, do that 10 pay. Then the third option is the long term care annuity. Well, this is a single premium only type design and it’s really just a neat option that sometimes we have people who have, who write a check for this. And because we can put two people on husband and wife on an annuity, the other thing that we tend to do or see more of is people who already have an existing annuity and we can do an exchange from an existing annuity into this annuity with long term care benefits. A lot of people have annuities that they got a few years ago and are just kind of renewing at 2%, you know, 2.5% rates. Not really do anything, not it’s not exciting enough to write home about, but it’s also not half a percent where you’re really incentivized to do much. And so this is just a neat thing to be able to say, let’s take those annuity values, we move it into this annuity, there’s still the annuity cash value. If kind of like the life insurance, if I never need it, there’s still an annuity, there’s still the annuity cash values that then go to my beneficiaries, my kids. But if I need it, here’s my annuity cash values and then here’s the extra long term care pool portion. 

 

Richard Taylor: [00:38:24 – 00:38:26]

And the premium for that is just taken from the annuity. 

 

Mark Maurer: [00:38:26 – 00:38:51]

Right. So internally, let’s use the same numbers. I put in $200,000, the annuity earns 3% and it’s going to take whatever cost for that annuity rider out of it. So let’s say it’s about 1%. So the annuity cash value went up by 2% because it’s paying for that, that extra long term care rider portion. I’m not paying for it out of pocket, it’s just coming out of the earnings. 

 

Richard Taylor: [00:38:52 – 00:39:16]

And Mark, how would that when we take on clients who have got annuities, even though they’re not drawing down on them, oftentimes they’ve been sold to them as late with some sort of income rider and they do intend later on to use them to supplement their retirement benefits, their income. How would that interact? I’ve got an annuity. I want to use it for long term care, but I also want to take income from it. Can I, Should I? 

 

Mark Maurer: [00:39:16 – 00:40:12]

No, we can’t mix the two. Good question. But yes. If the income rider or wanting to use it for income is the goal or a goal, then this doesn’t fit. This is sort of like the cash value in the life long term care policy. It’s there, but that really should be Escape Hatch 76. Once you put it into this long term care annuity, you really don’t want to touch it unless you touch it for long term care. Any, anything you start to do, even if you take withdrawals from it. Once I start taking any money out of it, I actually reduce my long term care benefits proportionally, not dollar for dollar. So let’s say I put in $200,000, I take a $20,000 withdrawal, that’s 10%. I don’t reduce my long term care benefits by $20,000. I reduce my long term care benefits by 10%. If it’s for income, we don’t want to mix the two. 

 

Richard Taylor: [00:40:12 – 00:40:45]

I can see a scenario where someone’s got an annuity that they’ve had for a while. It turns out that it’s kind of super plus to their requirements now they don’t need it for an income. They might want to. An option might be to attach an income rider to that. Sorry, a long term care added to that to cover them for long term care. What about if someone’s got, let’s say a real large annuity, they don’t need the hook. Can they, can they, can they surrender some of it and leave some money in there and then add a rider to it? 

 

Mark Maurer: [00:40:45 – 00:42:02]

So there’s two things there. I’ll do the first one and you mentioned this people. This is really exciting for someone who has a really old annuity. So let’s say they put in $50,000 back in 1986 and it’s grown to $200,000. There’s $150,000 of deferred gains in there. So if they cash that policy in, they’re going to $150,000 of that is going to be recognized as taxable income. Yeah, or they annuitize it. A lot of that’s going to be income every year. When you transfer this to the long term care annuity, when you start receiving benefits from the long term care portion, all those payments are tax free. Oh, so there’s a really cool. I get excited about taxes sometimes, probably more so than, you know, just shows were a little different. But I think that’s a really neat port, really neat aspect of this for someone with an annuity with a big deferred gain. Like you said. What do we do with this? I don’t have a great idea that’s going to not create taxes in some way, shape or form other than letting it sit. And this is a really neat way because if you do use it through the long term care rider, it’s tax free. 

 

Richard Taylor: [00:42:02 – 00:42:47]

That is a great bit of arbitrage. Let me give you another example. I shouldn’t do this. I’ve got a specific person comes to mind. We have a client who’s basically got well over a million dollars in annuity that he should never have got. He just should never. He just should not have this annuity. And the plan is when it becomes a vet, when it’s out of his charging period, will almost certainly surrender him. Not almost certainly, but what I’m thinking is for someone like that is rather than surrender, he just does not need this, anything like what he’s got in this annuity. Would he be able to take some so he’s not got huge embedded gains in this? Would it make sense for someone like that to encash some of it but leave some in and out of rider? Is that possible? 

 

Mark Maurer: [00:42:49 – 00:43:40]

Possible, yes. That gets down on the little bit of the mechanics of the insurance company. So probably we’re a little in the weeds here. But a normal transfer of the cash value is called an absolute assignment. So if I transfer from insurance company A to B, they’re sending 100% of the policy, 100% of the contract. Like with life insurance, you can’t say, well, I’m going to give you some of this cash value. Do I still keep some death benefit? Do I have two policies? Now an annuity can be slightly different in that if insurance company A says yes, we will allow a partial 1035 exchange. We can transfer 50% of the cash value. We’ll transfer 50% of the cost basis. We can and we will do that. So that’s a maybe. Okay. Okay. 

 

Richard Taylor: [00:43:40 – 00:43:43]

Well let me ask you another question. All right, so I can see a scenario. 

 

Mark Maurer: [00:43:43 – 00:43:52]

The idea is great. A lot of that would depend on the existing insurance company and their willingness and ableness to say yes, we’ll send part. 

 

Richard Taylor: [00:43:52 – 00:44:21]

Okay, understood, I can, but the other scenario you mentioned, I can see that’s enormous benefit for that. But if you, in general, if you’ve got someone, let’s say, let’s take my 200 grand example, I’ve got 200 grand. I want some long term care. I don’t have an existing annuity, it’s just $200,000 in my account. Am I better doing a permanent policy or an annuity? 

 

Mark Maurer: [00:44:21 – 00:45:34]

It’s a good question. A lot of it depends on if there’s a spouse. Sometimes that’s easier to do with, with the life insurer with an annuity than it is a life insurance policy. The annuities also tend to be a little more lenient when it comes to underwriting. And so if someone maybe has a few health issues, maybe, you know, maybe we’re not talking about, you know, really, really big issues, but maybe more so than, you know, the average bear, then the annuity might be a good idea. As far as sort of which one’s better. The, the, the life insurance policy tends to have a little more death benefit. As far as if my main kind of concern is okay, wanting to leave something for somebody than the annuity, the annuity tends to just have that ability to offer one person or cover a spouse fairly easily with maybe not a spotless health record. 

 

Richard Taylor: [00:45:34 – 00:45:53]

Right. Well, and because we are, because we are cross border, because our folk are, are Brits in America and Americans overseas, including Brits who have gone back to the uk. How would this do? You know, I mean this is, put you on the spot. You might be able to answer this, but how would it work if someone had one of these and then they, and they left and they were in another country? 

 

Mark Maurer: [00:45:53 – 00:46:20]

Yeah, good question. So every, every policy is going to have some form of international benefits. And I’d like to say I know them off the top of my head. I don’t. But their policies will either do something like we’ll pay the full benefits for two years while you’re overseas and then maybe if you need to continue benefits, they want to have you come back here. 

 

Richard Taylor: [00:46:20 – 00:46:30]

Oh really? They want you to. You’d have to. So if you live spent, you know, settled back in the uk, you get two years and they get two years shift up to the US Wow. 

 

Mark Maurer: [00:46:30 – 00:47:50]

Right. And then if it’s the life insurance policy, then you just still have the death benefit. You know, you just aren’t able to get much more out of it. I think more common is some plans will do 50% of the monthly benefit but not have a time expiration date. So now I would imagine that something like the UK is probably a little bit easier for the most part. We understand most of your words and medical records should be pretty easy for most of us to read, except when you say stuff like flat instead of apartment. But that one probably is not as big of a deal as if you were receiving care in, let’s say, Korea and all of your medical records in Korean. And no one at Lincoln who does the moneyguard policy can read Korean. And some plans will. More often than not, that indemnity type plan is going to work for someone who’s receiving care overseas because it’s that check as compared to a reimbursement of expenses. Most often here in the US when we do the reimbursement, it’s actually more often than not it’s the nursing home or the home health care who’s helping fill out the forms for the reimbursement to the insurance company. 

 

Richard Taylor: [00:47:50 – 00:47:57]

Do you think, are there any policies that just will cover you as if you were in the US or is it always going to be a restriction? 

 

Mark Maurer: [00:47:58 – 00:48:49]

That’s a good question. I think the biggest part of it is that how is the insurance company able to confirm that somebody is still needing care and receiving care to that like we talked about, we can see how it goes wrong when you say my husband is the one verifying that I need care. If, you know, if you’re in the US if you’re in Canada, it’s very easy to see the care that is being provided in some of those things. The issue with the overseas and again, the UK is probably one very small step away from the US and some of this is is somebody still receiving care, is still somebody still needing care who’s able to verify this after a certain period of time? 

 

Richard Taylor: [00:48:50 – 00:49:09]

So I’m hearing you, you just need to, if you are expats, you just need to, like there’s never. You just need to take care that you need to understand what if you’re going to get. If you’re going to do one of these. Because there’s always a chance next Pat will leave. Even the ones who say they’re never going to. There’s always a chance. You need to make sure you’re aware that at least you get some coverage. 

 

Mark Maurer: [00:49:10 – 00:49:10]

Yes. 

 

Richard Taylor: [00:49:10 – 00:49:13]

Somewhere when you, when you have. 

 

Mark Maurer: [00:49:13 – 00:49:39]

And they all have. Yeah, they have varying levels of degrees. So that’s just one of those things for, you know, and if we’re helping you with a client. Oh, Mark, make sure I need to know the international benefits. It’s fairly easily stated in all the contracts. It’s pretty easy to find. It’s just knowing that that’s something that’s important. You may not always pick again. Moneyguard. If their international isn’t quite as good as nationwide, their securians. 

 

Richard Taylor: [00:49:40 – 00:49:50]

Super, Mark. Listen, I wondered if we’d have, if we’d have enough to talk about today, but we are coming to 55 minutes on long term care insurance. So I think we’ve done a great job. So thank you very much. 

 

Mark Maurer: [00:49:50 – 00:49:51]

Of course. 

 

Richard Taylor: [00:49:51 – 00:49:53]

Where can people find you? 

 

Mark Maurer: [00:49:53 – 00:50:07]

Ll I s.com or email me M A R K M A U R E r l I s.com or reach out to Richard and you know, ask him any questions and we’ll, we’ll coordinate. 

 

Richard Taylor: [00:50:07 – 00:50:14]

Super. Great. Well Mark, I appreciate it again and I look forward to you coming on for your third appearance in the, in the not too distant future. 

 

Mark Maurer: [00:50:15 – 00:50:15]

I love it. 

 

Richard Taylor: [00:50:15 – 00:51:16]

All right, cheers Mark. Bye bye. All right folks, that’s another episode of Expat wealth under our belts. Thank you for listening. I appreciate it and I appreciate you. If you’re enjoying the show and would like to support the mission, which is to help ambitious expats thrive in America and ask you to subscribe to the POD wherever you listen and also consider leaving a rating and review, this stuff really does matter. Please help us get this information to the people who need it, that is to your fellow expats. Just a quick reminder that this show is brought to you by Plan First Wealth. We are a US based financial planner and wealth manager and we help successful American and international families living across the US to make the most of their opportunity and ultimately to retire happier. If you’d like to know more about how we might be able to help you, you can find us on our website, www.planfirst wealth.com or you can look me up on LinkedIn. Do get in touch. We’d love to hear from you. As always, thank you to the podcast guys for their help producing this episode and the entire show. See you next week.