Wealthy After Divorce

S2EP5: Long-Term Care for Grey Divorce with Terry Altman

• Season 2 • Episode 5

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Are you in your 50s (and up), divorced or in the process of divorce? A future long-term care need can derail your entire financial plan and divorce settlement-unless you're  prepared.  Long-term care needs in our later years can be catastrophically expensive-especially when you  don't have a partner to share the burden.  Whether it's in a desirable facility or in your home; you want to make sure you're protected. Join us as we talk with renowned Terry Altman, CLU, ChFC, CFP a veteran risk management and insurance expert, who brilliantly demystifies this complex topic. Terry, with his profound experience in the field, paints a clear picture of long-term care insurance, its importance, and who it is essential for. He emphasizes that this insurance doesn't just shoulder nursing home costs but also covers in-home care, something many people often overlook.

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Speaker 1:

Hi everyone and welcome back to Wealthy After Divorce. This is Jackie Restler and I am so excited about this episode because my guest is Terry Altman, who has been in risk management and insurance for over 30 years. but I know Terry personally And he actually was one of my first financial planning teachers. He spent 15 years teaching financial planning candidates at Oakland University and I was in one of those classes and ever since then I have always counted on Terry as the best and most excited expert about insurance that I know. He currently is retired from consult from his practice but he has his own business called Altman Financial and he consults with financial advisors on risk management. So welcome, terry.

Speaker 2:

Well, it's great to be with you, Jackie. Looking forward to this. This is going to be fun.

Speaker 1:

I'm so excited Again, we have to take more than one episode because you have so much knowledge on so many different insurance topics but today we're going to be focusing on a topic that affects the gray divorce population. So gray divorce for our listeners is anyone really who's over the age of 50. So since I fell into that category I don't like that term necessarily, but what a new statistic that I just read is that 50% of all people getting divorced right now fall into that demographic of 50 and up, and long-term care insurance is something that so many of those people ask me about, and I know that there's a lot of questions. So I'm really excited to have you here shedding some light for us on that topic, and this will be more of a conversation than an interview. Okay, so can you tell us a little bit, just for anyone that doesn't know what is long-term care insurance and who needs it?

Speaker 2:

Okay, well, that's a very big question right there. That could take our whole time. Okay, long-term care refers to a scenario where a person needs care that doesn't fall into the normal categories of medical care. In other words, when we think of medical care, we think of getting vaccinated, or we think about having a broken arm, you know, put it into a sling, and that sort of thing.

Speaker 2:

In the case of long-term care, what we're talking about when, at least in a typical sense, we refer to what are called activities of daily living, and these are things that can become difficult as we age. So activities of daily living are typically listed as toileting, that is, the ability to go to the bathroom by yourself. Transferring, meaning being able to get from a bed to the dining room table, back into the living room to watch television or whatever else. Continence, the ability to not soil yourself. Eating, to be able to provide for yourself.

Speaker 2:

Eating-wise bathing, for example, getting in and out of the bathtub or the shower, dressing yourself, things like that. Those are referred to as activities of daily living And, generally speaking, a long-term care event is when you lose at least two of those abilities, and that typically doesn't happen to people that are in their 50s or 60s, but it sadly does happen to people that are in their 70s and their 80s. So, part of planning for the future in particular when you're talking about a great divorce population this is an issue because you want to not just simply look at the next two to three years and figure out how you're going to make the mortgage payment.

Speaker 2:

You want to go further ahead and making a plan for what life looks like post-divorce. Now, the other trigger for a long-term care event is also directly what we call cognitive impairment, most commonly referred to as Alzheimer's, but there are other forms of cognitive impairment. This can be something that's more complicated than just simply forgetting where you put your car keys. It can be forgetting to turn off the stove, or forgetting to put your pants on before you go out to walk the dog. The point is when you just simply forget stuff that's really important, when you don't recognize your own kids or your siblings, things like that. So these are among the things we think of as long-term care events, because somebody's going to have to take care of you. Now there are also associated areas like that that have come into part of what we're talking about, what we call independent living activities.

Speaker 2:

For example, can an elderly person, can they use the telephone? Can they shop for themselves? Can they prepare their own meals? Can they do housekeeping? Can they arrange transportation, even if they can't drive themselves, but can they arrange for transportation to get to a medical office or whatever else? Can they be trusted or relied upon to take medications that they need for their own well-being? Can they manage their own finances, can they balance a checkbook? These are the sorts of events that may become more and more difficult as people age, and so these are the sorts of things that we're going to be discussing now in terms of planning for the fact that people do tend to lose some, or multiple some, of these abilities as they age.

Speaker 1:

And are you saying that long-term care insurance covers that? so we're talking, maybe home health care.

Speaker 2:

Yes, generally speaking, what it would back in the 90s.

Speaker 2:

It was all frequently referred to as nursing home insurance with right, yeah just to cover a nursing home expenditure, and long-term care insurance would cover nursing home expenditures. But because this has become so much more common and it's so much more nuanced now than it used to be, almost all long-term care coverages now will cover in-home care. If you were to ask the typical person needing care, do you want to do this in a nursing home or do you want to do this at home? 90% of the time people are going to say I'd rather stay home if I can, and so the reality of this is that good coverage is going to provide for care in the home as long as it can be done. Now, having said that, let me make the observation The majority clear majority of nursing home admissions are not just simply all of a sudden out of nowhere.

Speaker 2:

Somebody needs to go to a nursing home. Nine times out of ten, they have been receiving care of what we would call long-term care at home for a period of time, but it simply gets to the point where it can no longer be. The need is so great that it no longer can be provided at home. So the idea would be that the coverage may provide care while someone remains at home, but it may supervise into a transition into a nursing home, if that becomes necessary.

Speaker 1:

Okay, and when we were talking earlier, you mentioned to me that there's like a certain what you would call a sweet spot, for when is the right time to think about getting long-term care?

Speaker 2:

Right, yeah, the speaking and purely insurance related terms. Right now, probably the best time to be looking at this is when a person is in, say, let may, age mid 50s to mid 60s. Prior to mid 50s, it's number one. It's kind of not top of mind for most people because they're not really thinking about well, i'm never going to get that old, you know it just kind of like your resistance a great divorce.

Speaker 2:

We don't like to think of ourselves as getting older, but the fact is we all are day by day. So, generally speaking, once a person arrives in their mid 50s is probably the best time to be starting to shop for long-term care insurance, for two reasons. Number one, because typically you've not had any major events that would make it difficult to be underwritten for coverage. Just like life insurance or disability insurance, an insurance company wants to underwrite their risk And so if you are already in a situation where you're needing care, you may not be able to qualify. So the older you get, the less likely it is you would be able to qualify. But also there's a kind of a sweet spot of pricing. I would say The sweet spot of pricing might be between age 58 and age 61 or 62. Would be probably when you're going to get the best deal. Quote unquote Okay, So not before You might.

Speaker 2:

You might very well. In particular, where that can be very attractive is if you are a employer provided coverage. Now, that's not the very common thing, but some people may actually have employer provided group long-term care. It's a great benefit if it is something that is provided for you And for those of your listeners who may be who may still be corporate employees. It's worth inquiring of your human resources department as to whether or not that may be available As a group benefit.

Speaker 1:

So one of the things that you break that you that, when you say that that makes me think of is that a lot of people that I work with that are getting divorced are women, And they may not be the corporate employee I mean, it doesn't always work that way, but so it often occurs to me like if I'm working with a 55 year old or, let's say, a 60 year old woman that I'm always going to bring up. Have we thought about long-term care Insurance?

Speaker 1:

Yes, and especially if the spouse has something offered through their employment.

Speaker 2:

Oh, yeah, what would be the.

Speaker 1:

What would be the next step for someone who's thinking about whether or not they should get long-term care insurance?

Speaker 2:

That's.

Speaker 2:

That's a very good question.

Speaker 2:

My advice in this matter would be that once the terms of the divorce are clear whether the divorce is finally filed or not but once the financial terms, the divorce have become pretty well, it's pretty obvious how this is going to settle out.

Speaker 2:

I think it's important for the financial planner, or the divorce financial analyst in your case to make an income or retirement income projection to try to determine if a point is feasible, going forward, that there's going to be sufficient income for the for the client to be able to retire on a reasonably comfortable basis. That income projection then is going to take a look and say do we have either sufficient income from pensions and Social Security or from some other source rental, real estate or some other income producing investment or to be based on assets where we have an accumulation, let's say from a, from a quadro or from a 401k plan or an IRA, where there's assets that can be liquidated gradually during retirement. If the income is sufficient, then the question becomes if there is a major unanticipated expenditure for long term care, will that tank the retirement income plan? So my suggestion is that the plan the question of whether or not to address the long-term care question is dependent in part on the sufficiency of income.

Speaker 1:

Okay.

Speaker 2:

Now some people coming out of a divorce are not in the situation where they can even reasonably do a retirement income plan because it's gonna be necessary for them to remain in the workforce indefinitely. If that's the case, then it may be too soon to address the long-term care issue and you've gotta first address the ability to retire at all. But if the retirement income scenario is at least reasonably healthy, that's probably a good time to say okay, but what? if? You may recall, jackie, when we were in our class, one of the things I said is that the risk manager is the guy that always looks for what can go wrong. So I'm the guy that goes around. I've got a little thunderstorm cloud, i carry it everywhere I go and I'm always looking for what's the disaster, what's the potential looming disaster here, and for a successful retirement income plan. more often than not, the one thing that will tank a retirement income plan is unexpected healthcare and unexpected long-term care expenditures. Let me tell a story there that I think is worth your people hearing.

Speaker 2:

I had a longtime colleague of mine that I used to work with very closely. We were best of friends, played golf together all the time. He was a successful businessman and I had multiple businesses and had done very well in life. They had net worth well up into the millions, and I remember talking with him about this. his mother was in a nursing home and had been in a nursing home for years and years and years without assets, and my colleague, my friend, had been providing her long And if this was she was on her eighth year in a nursing home.

Speaker 2:

Life expectancy was 10 to 15 years longer and he had already spent a million dollars on her long-term care. And the events that we're talking about were now 15 years ago. So if that were today, it would have been double that. The costs of long-term care are double what they were 15 years ago. So I mean, we're talking about literally potential for millions of dollars of unanticipated expenditure which could basically impoverish someone in their older age. This is a real serious issue, and particularly so, i think, for people that are exiting the financial tumult of a divorce. it's not something that they should overlook.

Speaker 1:

Right, and so, if I can summarize, what you're saying is that, once the divorce is done, and I recommend this to everybody that they meet with a financial advisor, especially if they haven't done so before, but they prioritize that on their post-divorce to-do list And then, they have the financial run-of-facial projection for them to say are you gonna be okay in retirement?

Speaker 1:

And then that's the place that they wanna bring up whether or not they need long-term care. I wanna pose a different scenario to you, which is that when I'm involved in a divorce case, i'm like you. I don't like to think about it, i guess, but I always have that same cloud over my head of what can go wrong to derail my client settlement. Because what I'm looking at is I wanna make sure that my clients spend a lot of time and effort trying to figure out what the best settlement for them is, and we advocate for that. So if it's possible that I think that they're going to need long-term care, i need to make sure that's in their budget.

Speaker 1:

That there's for the premium for that. So, I think that the conversation would be. I mean, certainly there's so much going on. As you mentioned, when someone's going through the trauma of a divorce, they probably don't feel like talking about long-term care, but they also don't feel like talking about health insurance and we have to talk about that, or life insurance or anything else, or disability insurance, for that matter, exactly right And so, but I agree with you that this needs to be prioritized because it could derail the whole plan.

Speaker 1:

And another thing that we were talking about before we started recording was that you mentioned, and I think a lot of people depend on Medicaid. So, okay, i'm not worried about it, because if I can't afford it, i'll go on Medicaid, and I like the way you described Medicaid.

Speaker 2:

Yes, okay. Well, let me first make the observation that, mistakenly, a lot of people think that Medicare will cover long-term care, and Medicare has only very, very limited coverage and only under very special circumstances. Okay, medicare only covers nursing home care for a certain period of time, only after a three-day hospital stay. So Medicare is only gonna cover what we think of as nursing home after you've been in the hospital for three days because you broke your leg or because you had a heart attack or something like that, or maybe a stroke, something like that. All right, it doesn't cover the vast majority of nursing home admissions and it doesn't cover at-home care at all, not a next, all right. So the first thing that people need to recognize is Medicare is not going to help you. You cannot counter it.

Speaker 2:

Medicaid can help you, and Medicaid and I don't mean to be disparaging by saying it this way, but Medicaid is basically medical welfare for indigent people. It's for people that have nowhere else to turn, and in order to qualify for Medicaid, you have to spend down all your assets And the Medicaid facilities. If the push comes to shove and people go basically bankrupt financially paying for their long-term care, medicaid does step in, it does provide care. It can be care at home, it can be care in a nursing home, but the nursing homes that accept Medicaid, generally speaking, are not the nicest homes.

Speaker 2:

You don't get a choice as to where you go, you don't get a choice as to the quality of the care And, as I mentioned to you earlier, you don't even get a chance to pick a Medicaid nursing home based upon whether it's close to your kids or not, or close to your loved ones or close to your home base. You might be shipped off. It would be within your state, but it could be all the way across the state. I had someone I knew who had an elderly relative. They lived in South East Michigan, but mom was put in a Medicaid nursing home in the UP because that was where the nearest available bed was. So the Medicaid That's awful. Medicaid is worse than nothing, but it's not always a lot better than nothing. So you don't want that to be your first and only option. Let's put it that way.

Speaker 1:

Okay, so if we, i'm sure that you have convinced everyone listening to this that they don't want to depend on Medicaid. So let's see that they're not going to depend on Medicaid, and it sounds like what they should be doing when they're considering, when they're in the middle of divorce, is they should reach out to their financial advisor while they're in the middle of it. And a lot of clients this is always interesting to me, a lot of clients they bring in someone like me who specializes in divorce financial planning, but they already have a financial advisor that they don't talk to about the fact that they're getting divorced.

Speaker 1:

But this might be one of those things that, if they're not working with someone like me, they should reach out to a financial advisor and look at what the cost is, and I guess the last thing I wanted to know about this is what can people expect in terms of the types of policies that you could get as far as? are there policies that you pay for with lump sum? Are there policies?

Speaker 2:

that? Yes, good question. Starting back in the 90s, all long-term care insurance was set up for a monthly or quarterly or annual premium and it was you paid until you died period And it was designed to provide a benefit if and when you needed care. But if you didn't need care, you never saw your premium back. Now that doesn't necessarily mean it's wrong, because you do that with your car insurance all the time. You renew your car insurance every six months because you have to and it's not like at the end of the six-month period You say you won't. Gee, i haven't gotten any money back from my insurance company, so I'm gonna go ran the run the car up into a bridge abundance to make sure I get some money back in the insurance company. You don't want that. But so it's not that that's necessarily wrong. But what has happened with that traditional type of coverage is because back in the 90s especially, the providers so badly underestimated claim experience, both in terms of size and frequency, that the premiums kept going up and up and up and up, and Every year people were getting premium increases and they it finally came to the point where people were dropping their coverage because they couldn't afford it. So There was a new design that happened starting in the early 2000s. That has in in my own case and with my own clientele with.

Speaker 2:

Where I'm making recommendations as a consultant, is to use insurance policies that are It's provides long-term care coverage but it's based on a life insurance chassis, meaning That you're buying a certain dollar amount of benefit And but the policy provides that in the event of a long-term care need, that you can spend down What would otherwise be the death benefit of the life insurance On a monthly basis to provide for your coverage. So The idea might be well, it's a hundred thousand dollar life insurance policy. If I pay for it and Never need the long-term care, the hundred thousand goes to my name beneficiary, presumably the kids or even a charity of your choice, if that's. If that's, you know the way your family situation is, but I have the ability to spend down For long-term care on a month-to-month basis if I need it. That's the much more common form of long-term care insurance anymore.

Speaker 1:

Okay, so that's like a term insurance policy, is that right?

Speaker 2:

Well, it would be permanent life insurance, so would not be term. Term term is that you're expecting term insurance to go away at a certain age.

Speaker 1:

Okay, so it's just a permanent policy, but you put a lump sum in up front.

Speaker 2:

Well, it can be a lump sum, it can be an annual premium, or it can be what we refer to as a five pay or a ten pay. Ten pay means That you know up front that you're gonna pay a premium for ten years and then you're done. Or five pay would be a premium For five years and then you're done. It can be single pay, where you pay it all as a lump sum up front. Now that is a situation where typically you're talking about a premium in the six figures. So that may or may not be something that a client is able to do.

Speaker 2:

You may not have those sorts of resources, but if, if someone approaches this, you know 55 to 65 year old and there are, there are what may be a couple hundred thousand dollars of available assets, that's not a bad way to go. The advantage of the single pay, five pay and ten pay premiums is Is, once you start that policy, the insurance company can never raise your rate. If you do an annual premium where you're paying every year, even on a life insurance chassis, they have the opportunity to raise the rate later on.

Speaker 1:

Okay, but this is a special and I wanna warn anybody too that's listening this isn't your regular. You have to have a special policy that's for long-term care purposes. It's not every insurance policy. They do That is correct.

Speaker 2:

Yes, it's more and more common and you'll find, for example, if you have an existing relationship with an insurance agent, you could ask them about this, because many companies now are offering products like this, but it's not necessarily every contract Then you may have life insurance already in place.

Speaker 2:

But if that may or may not be available for what you have, what might be advisable is a lot of times, once people especially after a divorce you're gonna be reevaluating your life insurance need anyway. You may have a much reduced need for life insurance. Let's just simply say, for example, you arrive at your divorce and you've had $300,000 or $400,000 worth of life insurance because you were providing for your kids. You were providing for your now soon-to-be ex all right, and no longer need that. Well, maybe what you do is you take that old policy with its built-in cash value and transfer it into one of the newer policies, maybe with a smaller face amount, but using the cash value now to provide for some long-term care coverage. There's some strategic ways of working through these sorts of issues that may make it more affordable than you could realize. You may have assets that can be repositioned.

Speaker 1:

Okay, wow, this is much more complicated than I was thinking, So I think that it does need to be brought up during the divorce, and I do think that you would be a great resource, Terry, for divorce attorneys to explain this to and also financial advisors, obviously, because I think that you're a general financial advisor, that's a generalist doing assets under management and tax planning and all of the things that go along with that even if they do risk management, they're probably not gonna know about something like this as it relates to divorce in couples.

Speaker 2:

I think that's a really important point For the sake of your listeners. if you have an existing financial advisor, that's good and that's your bless there. But many times now what's happened over the last 20 years has been that there's been such a focus in the financial planning community on being fee only that what has happened is because many insurance products are commission-based and many fee only financial planning firms are not maintaining their risk management competence because they see it as a conflict of interest with their fee only status. So having had a financial advisor is a good thing, but recognize the fact that they may or may not be current on some of these insurance-related issues. So that's why, even though I'm retired from financial planning, i still maintain a consulting business, because there are a lot of financial planners out there that need risk management advice because they're current on it And individuals contact you directly, or let's say that their financial advisor doesn't do that type of Either one, the point being that if they wanted to contact me directly, that's fine, with the understanding.

Speaker 2:

I don't manage assets, i don't do any kind of investment work any longer, or whatever else, and so I'm going to refer them right back to their advisor for all of that sort of stuff. But if they have a risk management need I can help them with, by all means contact me. or probably the best way to do it would be to ask their financial advisor to bring me in as a consultant to work together, because what we'd be talking about is repositioning assets and it has to make sense in the larger picture of what's best for the client. And I think a financial advisor that's committed to a fiduciary standard and committed to doing what's best for the client, even if it means they're going to lose assets under management which they might, if we talk about putting a couple of hundred thousand dollars into a long-term care product but if it's in the client's best interest, they'll sign off on that because it's in the client's best interest.

Speaker 1:

Right and again, i think, is there anything that we haven't covered that you would like to cover?

Speaker 2:

There's much more to say about this, but I think probably it needs to wait for another time.

Speaker 1:

Okay.

Speaker 2:

Because there's a lot of things to talk about. I think probably many of your podcast listeners may need more information than they have about disability insurance. They may need information about, for example, what to do with a life insurance policy they no longer need. There's a lot of risk management issues out there that your people may have questions about, or they don't even know that they should ask questions.

Speaker 1:

Well, i have to have you back soon, yeah, so, but this was great, teri. Thank you so much. I really appreciate you sharing your knowledge, which is so vast, with our audience. Thank you.

Speaker 2:

Glad to help. Glad to help Really enjoyed it and I look forward to doing it again. That's sometime, that'll be fun.

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Jacki Roessler, CDFA®

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Melissa Fradenburg, CDFA®️

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